SEBI BOARD MEETING
Securities & Exchange Board of India (SEBI) in its Board Meeting held on 2nd April, 2012 had taken long pending important decisions with respect to Ownership and Governance of Market Infrastructure Institutions (MIIs) (i.e. Stock Exchanges, depositories & clearing Corporations etc.) and has further approved the proposal to frame SEBI (Alternative Investment Funds) Regulations, 2012.
The key decisions taken at the Board meeting are:
1. The most important decision taken at the meeting is to allow Stock Exchanges & Depositories to be Listed. In this regard SEBI has further provided that the Exchanges would not be allowed to be listed on itself, shall be permitted to be listed within three years of SEBI date of approval and must put appropriate of mechanism to resolve any conflict of interest. Clearing Cooperation are not allowed to be listed.
The aforesaid decision of the Board has been contrary to the recommendations made in the Report of Dr. Bimal Kumar Jalan on Review of Ownership and Governance of MIIs, although other recommendations so made in the report have been broadly accepted.
2. It is agreed in the Board Meeting that that the Stock Exchanges and Depository would be required to have a Net-worth of at least Rs. 100 Cr. and Clearing Corporation to have Net-worth of Rs. 300 Cr.
3. Further, SEBI has approved for the diversified ownership amongst the MIIs:
· Stock Exchanges: Single Investor cannot hold more than 5% and except Stock Exchange, Depository, Insurance Company, Banking Company or public financial institution who can hold upto 15% and public category holding should be 51%.
· Clearing Corporation: At least 51% holding will be held by Stock Exchanges with a condition that no single stock exchange will hold more than 51% in a Clearing Corporation. Further, Stock Exchange holding 51% in a Clearing Corporation cannot hold more than 15% in any other Clearing Corporation.
· Depositories: minimum 51% holding will be held by sponsors and No other entity will be allowed to hold more than 5% of equity share capital. Further, a single stock exchange will not hold more than 24%.
4. Important provisions with respect to Governance structure are also addressed requiring HODs of Members department as well as Listing and Trading Regulations to report to independent committees of the board of the Exchanges as well as MD/CEO. For governance of Members Department, for long run it is proposed to set up Independent SROs. Governance.\
5. Also, Conflict Resolution Committee to take care of conflicts of interest to be formulated by SEBI with majority of external and independent members.
6. It is also decided to have separate risk management with independent clearing corporations mandatorily be registered with SEBI for which regulations to be formulated by SEBI.
7. As another step to have better risk management, it is also decided that Stock Exchanges would be mandated to transfer 25% of their profits to Settlement Guarantee Funds of Clearing Corporations and depositories would also transfer 25% of their profits to Investor Protect Fund.
8. In addition to above, decision with respect to providing exit to Non-Operational stock exchanges has also been taken in the same board meeting.
9. Another long pending decision with respect to formulation of Regulations for Alternative Investment funds is also taken by the SEBI board. The board has now approved to frame SEBI (Alternative Investment Funds) Regulations, 2012.
a. The proposed regulations would govern investment funds operating as Private Equity Funds, Real Estate Funds, Hedge Funds etc. and would require registration with SEBI.
b. SEBI (Venture Capital Funds) Regulations, 1996 would be repealed and existing VCF would be governed by these new regulations and shall not be allowed to raise any fresh funds or float any new schemes before being registered under these new regulations.
c. The categories of Alterative Investment Funds would be defined and the Regulations would not be applicable to Mutual Funds, CIS schemes, Family Trusts, ESOP funds, Employee Welfare Trust, Holding Companies, funds managed by ARCs, Securitization Trust and such other pools being directly governed by any other regulations in India.
d. The AIF would not be allowed to accept any investment from an investor of value less than Rs. 1 Crore and shall not have any fund or scheme having more than 1000 investors.
e. A minimum corpus of Rs. 20 Cr would be required and the manager or sponsor to continue to have interest in the AIF of not less than 2.5% of the initial corpus or Rs. 5 Cr whichever is less.
f. Units of AIF would be allowed to be listed on exchanges subject to minimum tradable lot of Rs. 1 core but AIF shall not be allowed to raise funds through stock exchange mechanism.
g. Maximum permissible investment limit in one investee company would be 25% of the investible fund and shall not be allowed to invest in associate companies.
h. All AIFs would have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009.
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