Seeking to strengthen the corporate governance practices as well as attract more investors, markets watchdog Sebi on Tuesday approved stricter norms related to independent directors, reduced the minimum subscription amount for REITs and InvITs and decided to introduce a framework for accredited investors along with other measures.
To provide easy access to investors to participate in public/rights issues by using various payment avenues, Sebi has also decided to permit banks, other than scheduled banks, to act as a banker to such issues.
The board of Sebi, at its meeting in Mumbai on Tuesday, gave its nod to allow resident Indian fund managers to be constituents of foreign portfolio investors and decided to amend mutual fund rules to provide for the investment of a minimum amount as "skin in the game" in the schemes floated by Asset Management Companies (AMCs) based on the risk associated with such schemes.
Continuing efforts to bolster the regulatory framework for independent directors, Sebi has cleared various amendments to rules governing the appointment, re-appointment and removal of independent directors -- a move that will also provide more say for public shareholders in the appointment and re-appointment of such people.
The new norms will be effective from January 1, 2022.
Under the proposed changes, a listed company will be required to disclose the resignation letter of an independent director and there will be a one-year cooling period for an independent director transitioning to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.
Further, the process to be followed by the Nomination and Remuneration Committee (NRC) while selecting candidates for appointment as independent directors would become more transparent. These include enhanced disclosures regarding the skills required for appointment as an independent director and how the proposed candidate fits into that skillset, Sebi said in a release.
Continuing efforts to deepen the market for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), the watchdog has decided to reduce the minimum subscription amount and trading lot size for them.
The minimum application value will be in the range of Rs 10,000-15,000 and the trading lot will be of one unit for REITs and InvITs.
Under the current norms, while making an initial public offer and follow-on offer, the minimum subscription should not be less than Rs 1 lakh for InvITs and Rs 50,000 for REITs under the current rules.
Allotment to any investor is required to be made in the multiples of a lot. At present, for initial listing, a trading lot should be of 100 units and during follow-on offer, each lot should consist of the such number of units in its trading lot as it had at the time of the initial offer.
Suraj Malik, Partner -- M&A Tax and Regulatory Services -- at BDO India said that reduction in application value and trading lot for REITs and InvITs will enable greater retail participation in such instruments.
"The government itself is targeting several REITs/InvITs to monetise state and PSU assets and this change will enable them to attract an asset allocation from a wider market of retail investors," he said.
The regulator will introduce a framework for accredited investors, a class of investors who may be considered as well-informed about investment products. Individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body corporates based on financial parameters would be eligible to be accredited investors.
In addition, the regulator has decided to introduce a minimum unit holders requirement for unlisted InvITs.
"The minimum number of unitholders, other than sponsor, its related parties and its associates shall be five together holding not less than 25 per cent of the total unit capital of the InvIT," Sebi said.
To ease the compliance burden on listed entities, a proposal has also been cleared to merge listing rules pertaining to debt securities and non-convertible redeemable preference shares into a single regulation.
Under the new framework, issuers other than unlisted REITs and InvITs that are in existence for less than 3 years, can tap the bond market on certain conditions.
The Sebi board also cleared a proposal to allow resident Indian fund managers to be constituents of foreign portfolio investors.
Besides, changes would be made to the prohibition of insider trading regulations whereby the reward for informants would be hiked to up to Rs 10 crore from the current Rs 1 crore.
Among other measures, the regulator would amend Sebi (Credit Rating Agencies) Regulations, 1999.
These regulations were amended "to define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognised stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority".
The board also approved Sebi's annual report for 2020-21.