Key highlights of SEBI Board Meeting on Thursday 20th May 2016

1.  Offshore Derivative Instruments (ODIs)
   Following suitable amendments to the Regulations/circulars are proposed to be made vis-à-vis ODIs:
   1. Stricter Know your client (KYC) & Anti Money Laundering (AML):
      1. Indian KYC/AML norms will now be applicable to all ODI issuers.
      2. ODI Issuers shall be required to identify and verify the beneficial owners/ the person(s) who control the operations in the subscriber entities i.e. holding more than 25% in case of a company and 15% in case of partnership firms/ trusts/ unincorporated bodies.
   2. Prior permission for Transferability: ODI subscribers will have to seek prior permission of the original ODI issuer for further/onward issuance/transfer of ODIs.
   3. Reporting of complete transfer trail of ODIs: in monthly reports on ODIs, all the intermediate transfers during the month would also be required to be reported
   4. KYC Review:
      1. At the time of on-boarding and once every three years for low risk clients
      2. At the time of on-boarding and every year for all other clients
   5. Suspicious Transactions Report: ODI Issuers to file suspicious transaction (if any) reports with the Indian FIU.
   6. Periodic Operational Evaluation system to be put in place to review of its controls, systems and procedures.
2. Dividend distribution policy for listed companies
   1. To enable the investors to take well informed investment decisions, It is decided that top 500 listed companies (by way of market capitalization) would be required to formulate and disclose in their Annual Report and websites their “Dividend Distribution Policy (DDP)”.
   2. DDP to include:
      1. Circumstances under which shareholders can or cannot expect dividend;
      2. Financial parameters to be considered while declaring dividends;
      3. Internal and external factors to be considered for dividend declaration;
      4. Policy as to how the retained earnings will be utilized.
      5. Provisions for varied classes of shares.
   3. When the company proposes to declare dividend on the basis of parameters other than what is mentioned in such policy or proposes to change its dividend distribution policy, the same along with the rationale shall be disclosed.
3. Proposed Amendments in SEBI Infrastructure investment trust (InvIts)
   1. To allow InvIts to invest in up-to 2 level SPV;
   2. Mandatory sponsor holding to be reduced to 10% from existing 25%;
   3. Maximum number of sponsors to be allowed to be up-to 5 from existing 3;
   4. Operational requirement to be aligned with provisions of Companies Act 2013 etc.
      Consultation paper will be placed on SEBI website to seek public comments on aforesaid proposed amendments.
4. Guidance Note on Settlement & Compounding Regulations
   1. As per existing provisions of SEBI Settlement regulations 5(2)(b), serious FUTP matters having market wide impact and having caused losses to the investors were not settled/consented.
   2. Due to non-clarity on interpretation of aforesaid provision, a Guidance note clarifying that “only those cases which in the opinion of the Board have a bearing on the securities market as whole and not just the listed security and its investors may be considered to have market wide impact and are to be taken up for Enforcement action only”
   3. The aforesaid clarification as per guidance note is proposed to be now incorporated in the Regulations
5. Amendments to the SEBI Act, 1992, SC(R)Act, 1956 & Depositories Act, 1996 vis-à-vis Roofit Industries Judgement
   1. Latest judgment of Supreme Court of India in the matter of Roofit Industries has created difficulties before SEBI Adjudicating Officers (AO) in passing orders for monetary penalty. As per the judgment, AOs during the period from 2002 to 2014 does not discretionary powers on deciding the quantum of monetary penalties.
   2. It is decided by the Board that a proposal to be sent to Central Government seeking amendment in law to clarify the powers of Adjudicating officer in imposing monetary penalties for cases from the period 2002 to 2014