SEBI Announces Major Reforms to Delisting Framework, F&O Eligibility, Influencer Rules and More


India’s Securities and Exchange Board of India (SEBI) announced a slew of major regulatory changes on Thursday aimed at simplifying the process for companies to go private, revising eligibility for the futures & options (F&O) segment, and tightening rules for financial influencers.

Delisting Made Easier

SEBI introduced a new fixed price delisting process alongside the existing reverse book building (RBB) option. Promoters can now buy back public shares at a minimum 15% premium to the “fair price” under the fixed price method. The regulator also lowered the threshold for mandatory counteroffers from public shareholders to 75% from 90%.

Changes to F&O Eligibility

SEBI revised the criteria for including and removing stocks from the F&O segment to improve liquidity. The new criteria include factors like median-quarter sigma order size, market-wide position limit, and average daily delivery value. This is expected to result in a slight increase in the number of stocks in the F&O segment.

tighter Rules for Influencers

SEBI tightened regulations around financial influencers (finfluencers) by prohibiting regulated entities and individuals from associating with anyone offering stock recommendations or promising guaranteed returns. However, associations with finfluencers involved solely in investor education are allowed.

Other Key Decisions

  • Foreign Portfolio Investors (FPIs): University funds and endowments are exempt from additional disclosure requirements.
  • Debt Securities and Non-Convertible Redeemable Preference Shares: Easier public issuance process for these securities.
  • Infrastructure Investment Trusts (Invits): Trading lot size for privately placed Invits reduced to ₹25 lakh.
  • Investment advisors and research analysts: New fee collection mechanism proposed.
  • Market Infrastructure Institutions (MIIs): Independent external evaluations mandated every three years.
  • Cybersecurity: Data classification and localization emphasis for robust security controls.
  • Alternative Investment Funds (AIFs): Limited extension for large-value funds to five years with approval, allowed borrowing for temporary shortfalls.
  • Technical Glitches: Removed automatic financial penalties on MII MDs and CTOs for glitches due to concerns about talent acquisition.
SEBI Reforms: Aimed at Efficiency, Investor Protection, and Market Strength

The recent regulatory announcements by SEBI aim to achieve a multi-pronged approach for the Indian stock market. Here’s a deeper look at the potential implications of these reforms:

Delisting Framework – Increased Flexibility for Companies

The new fixed price method for delisting offers companies a more streamlined path to go private. This could be attractive for companies that may find the RBB process complex or time-consuming. However, some experts caution that the fixed price method might lead to undervaluation of companies, potentially impacting minority shareholders.

Revised F&O Criteria – Balancing Liquidity and Risk

The revised criteria for the F&O segment aim to ensure that only stocks with sufficient liquidity are included. This could improve market stability and potentially reduce volatility for these stocks. However, some analysts worry that stricter criteria might limit investor choices within the F&O segment.

Tighter Finfluencer Regulations – Building Trust and Credibility

SEBI’s crackdown on finfluencers promoting stock recommendations or guaranteed returns is a step towards protecting investors, particularly retail investors, from potential scams and misleading information. This could enhance trust and credibility in the financial influencer space. However, it’s crucial to ensure the new rules don’t stifle legitimate financial education efforts.

Overall Impact – A Positive Step Forward

SEBI’s reforms appear to be a positive step towards fostering a more efficient, investor-centric, and robust Indian stock market. The relaxed delisting norms offer companies more flexibility, while the revised F&O criteria and finfluencer regulations aim to address potential risks. Additionally, the focus on cybersecurity and regular evaluations of Market Infrastructure Institutions highlights SEBI’s commitment to a secure and well-functioning market ecosystem.

Looking Ahead: Continuous Monitoring and Refinement

As with any regulatory change, it will be essential to monitor the effectiveness of these reforms over time. SEBI might need to make adjustments based on market feedback and evolving trends. Continuous improvement through data-driven analysis will be crucial to ensure that these reforms achieve their intended objectives.

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