Investor-friendly Decisions in SEBI Board Meeting

SEBI in its Board Meeting held on 6th October 2012 took various Investor friendly decisions. A brief synopsis of the same is given herein below:

Debt Mutual Funds now permitted to invest 10% more in the Realty Sector

Ms. Anjali Aggarwal
Vice President
+919971673336
anjali@indiacp.com
In a move that could help the ailing housing sector in India, SEBI resolved to relax the investment criteria for debt oriental mutual fund schemes in the Housing Finance Companies or the HFCs. SEBI has now allowed debt funds to invest an additional 10% (over and above the 30% cap in financial services segment) in the HFCs. In a circular last month, SEBI had directed mutual funds to ensure that total exposure of their debt schemes in a particular sector, for e.g. the financial services sector, shall not exceed 30 percent of the net assets of the scheme. The HFCs constitute a portion of the financial services segment since under the existing regulatory framework they are categorized as NBFCs.
However, the debt oriented mutual funds will be able to make the additional investment of 10% in the HFCs only under the following conditions:
  • Securities issued by the HFCs shall be rated atleast ‘AA” or above.
  • Such HFCs should be registered with the National Housing Bank (NHB).
  • Total investment in HFCs shall not exceed 30% of the net assets of the scheme
This move has come at a time when the Finance Ministry has repeatedly emphasized in reviving the housing sector. This decision is likely to improve the liquidity and interest rates in this sector and it is also hoped that this move will be able to integrate the housing finance sector with the capital markets and there will be better utilization of funding resources facilitating the Government’s social objective of increased home ownership and supporting the economy by creating demand for construction of new homes. Providing additional funds to HFCs would be an indirect way of helping the real estate sector.

Review of the Debt Limit Allocation Mechanism for FIIs

  1. The FIIs shall be allowed to re-invest during the calendar year to the extent of 50% of their debt holdings at the end of the previous calendar year.
  2. The utilization period for Government Debt and Corporate Debt limits will be reduced to 30 days and 60 days respectively.
  3. In the FII Debt limit, the unutilised limit in respect of Corporate Debt infra long term bonds category may be availed by the FIIs/Sub Accounts without obtaining prior SEBI approval till the overall FII investments reaches 90% of the limit.

 

Rationalization and harmonization of different routes for Foreign Portfolio Investments such as FII, FVCI, NRI, QFI etc.

With a view to rationalise/ harmonise different routes for foreign portfolio investments, SEBI has decided to come out with draft guidelines based on the guidance of the Working Group on Foreign Investment in India (WGFII), for consideration of the Government so that uniform guidelines are made for various categories of investors such as FII, FVCI, NRI, QFI etc. The said Guidelines will aim at simplifying investment process for various types of investors and thus give a boost to the foreign portfolio investments.

Expansion of asset classes which can be held in Demat form

In order to enable the investors to view the details of their holdings and transactions across all asset classes through a single consolidated statement, the Board decided to amend the SEBI (Depositories & Participants) Regulations to enable depository to share the necessary information / data with its SBU with respect to the assets/ instruments held by them for the purpose of generation of consolidated statement.
This will help the investors to keep their financial instruments in a safer mode, as compared to the physical documents. Holdings in demat mode reduce the chances of loss or forgery.

Minimum Public Shareholding under Securities Contracts (Regulation) Rules, 1957 (SCRR)

  1. It has been decided that SEBI would initiate a process to elicit a concrete plan of action and resolve issues in compliance with Rule 19A of SCRR.
  2. To safeguard the interest of the investors involved in such non compliant companies, it has also been decided that the concerned Stock Exchanges will carefully monitor and issue advisories to the shareholders of such companies.
  3. It also hinted that in case the non compliance continues, there could be potential penal actions that might follow.
  4. For the purpose of removal of any doubts, SEBI has clarified that public shareholding would be computed as “shares held by public” as a percentage of “total number of shares held by promoters, promoter group and public” i.e. B/A+B (where, A=Promoter/promoter group shareholding, B=Public shareholding) whereas Capital issued outside India will not be included.

Capital raising by loss making listed entities

It has been decided that the listed entities that are coming out with Further Public Offers (FPOs) will not be required to meet the profitability criteria stated in the regulation 26(1) of SEBI (ICDR) Regulations, 2009 whereas they will be continued to be guided by the provisions of regulation 27 of the said regulations.
This move will enable such loss ridden companies to raise funds by way of FPOs, where as under the extant Regulations, the pre requisites for a IPO/ FPO inter alia include profit making track record; Net Tangible Assets of more than Rs 3 Cr or more in each of the preceding 3 Financial Years; Networth of more than Rs 1 Cr in each of the preceding 3 Financial Years.

Powers to Depositories to take action over Issuers

The Board approved the proposal to suitably amend the DP Regulations to enable SEBI to take appropriate action against non-compliant issuers and their agents under the DP Regulations and empowered Depositories to take appropriate action against such issuer or agent as per their Bye-laws.
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