Here is a synopsis of some major decisions taken by SEBI in the aforesaid Board meeting held today:

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Qualified Stock Brokers (QSB) such as Zerodha, Angel One, ICICI Sec etc.

1.??????? QSBs to provide either the facility of trading supported by blocked amount in the secondary market (cash segment) using UPI block mechanism (ASBA-like facility for the secondary market) or the 3-in-1 Trading Account facility, wef February 1, 2025 as per the preference of its clients.

2.??????? All registered Stock Brokers can offer access to the optional T+0 settlement cycle to their investors. Stock Brokers are free to charge differential brokerage for the same.

3.??????? The number of scrips eligible for trading under optional T+0 settlement to increase in a phased manner from the 25 to top 500 as per the market cap.

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Ease of doing business – Research Analysts and Investment Advisors

1.??????? The minimum qualification requirement is reduced to graduate degree in specified fields earlier it was Post Graduate Degree.

2.??????? No prior experience as IA and RAs required in order to make application for IA/RA.

3.??????? NISM Series- XA and XB for IAs, and NISM-Series-XV for RAs required only initially at the time of registration. Thereafter, only a certification based on incremental changes/developments would be required.

4.??????? Net-worth requirement shall be replaced with a reduced requirement of deposits.

5.??????? Now you can make Application both as IA and RA at the same time.

6.??????? The requirement for corporatization by individual IAs has been relaxed. The threshold would now be 300 clients or fee collection of INR 3 crore during the financial year, whichever is earlier as compared with the existing threshold of 150 clients.

7.??????? Only Investment advice related to securities under purview of SEBI shall fall under the purview of IA Regulations. Other asset classes such as Art, real state shall not come under purview of SEBI.

8.??????? Trading call providers shall not fall under IA Regulation and would need to comply with SEBI RA ?Regulations, 2014.

New Product Class

1.??????? The new investment product is intended to bridge the gap between Mutual Funds and Portfolio Management Services.

2.??????? The new product will neither employ leverage nor invest in unlisted and unrated instruments beyond those already permitted for Mutual Funds.

3.??????? Derivatives exposure of the new product shall be limited to 25% of AUM for the purposes other than hedging and rebalancing.

4.??????? The new product shall follow nomenclature as ‘Investment Strategies’ while launching new offerings.

5.??????? The minimum investment limit for the new product will be INR 10 lakh per investor across all investment strategies of the new product.

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Alternative Investment Funds

1.??????? Pari passu rights across investors: The rights of the investors in investments of and distributions of the returns from a scheme of an AIF shall be pro-rata to their commitment in the scheme (subject to specified exemptions) and in respect of all other cases(such as voting, controlling the decision making etc.) ?the rights shall be pari-passu.

Exemption only to entities such as those owned or controlled by Governments, multilateral or bilateral development financial institutions, State Industrial Development Corporations and other entities as may be specified from time to time. These entities can subscribe to junior classes of units of AIFs with less than their pro-rata rights in the investments of the scheme.

2.??????? Existing schemes of AIFs that had provided priority in distribution to certain class of investors over others, while continuing with the existing investments, will not be permitted to raise fresh commitments or make investment in a new investee company, directly or indirectly.

3.??????? AIFs may be allowed to provide specified differential rights to certain investors, without affecting the rights of other investors based on certain principles and terms to be formulated by Standard Setting Forum for AIFs in consultation with SEBI.

4.??????? Large Value Funds shall be allowed to issue pasi pasu rights among its investors, subject to a waiver provided by each investor to this effect.

Offshore Derivative Instruments (ODIs, or erstwhile P-Notes) and segregated portfolios of FPIs are subject to disclosure requirements on par with FPIs

1.??????? Additional disclosure framework (as issued SEBI circular dated August 24, 2023) apply directly to ODI subscribers, sub-fund structures, separate classes of shares, and other equivalent structures of FPIs with such segregated portfolios, so that their disclosure requirements are on par with FPIs.

2.??????? Non-compliance with the disclosure requirement shall lead to redemption of ODIs/ liquidation of segregated portfolio within 180 days. Further, such defaulting ODI subscribers shall become ineligible to subscribe/ hold any positions through ODIs from any ODI issuing FPI.

3.??????? SEBI prohibits ODIs referencing Derivatives ; even though hedged ODIs on a one on one basis thru separate license was allowed earlier. Consequently, ODIs shall only have cash equity / debt securities / other non-derivative permissible investment by FPI as underlying and shall be fully hedged with the same securities on a one-to-one basis, throughout the life of the ODI.

4.??????? Existing ODIs hedged with derivatives shall either be redeemed or hedged with cash positions on a one to one basis, within a period of 1 year from the date of issuance of guidelines in this regard.

5.??????? The Board also approved a proposal to mandate issuance of ODIs (other than those with government securities as underlying) by FPIs only through a separate dedicated FPI registration, with no proprietary investments under such registration.

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