SEBI Board Decisions: SEBI Approves Regulatory Sandbox Framework, Amends MF, InvIT And Investment Adviser Regulations

SEBI decided to tighten its eligibility norms for investment advisers and decided to introduce an upper limit for their fees.

SEBI also barred the use of titles like independent "financial advisers" or "wealth advisers" by those dealing in the distribution of securities, unless they are registered as investment advisers also.

Announcing a slew of amendments to its regulations for investment advisers, approved by SEBI's board, the regulator said an individual adviser cannot provide distribution services, while firms would need to segregate advisory and distribution activities at the client level.

The new rules framed, after considering four consultation papers and public comments, are also aimed at bringing clarity in payment of fees and introduction of an upper limit on fees charged to investors, SEBI said. The last consultation paper was floated for public comments in January.

The market regulator will soon come out with a circular to ensure “Karvy-like incidents” don't take place or are contained, said Chairman Ajay Tyagi. Karvy has told the National Stock Exchange that it will pay the fund shortfall of Rs 678 crore by March by selling stake in a company. “We will wait and see,” he said at his last press conference at the board’s chief.

Other Highlights:

• Only 50 percent of top 500 companies had segregated Chairman, MD roles. Implementation issues led to extending deadline.
• Actively looking at recategorisation of mutual funds, will come out with guidelines.
• There will always be challenges, it is a vibrant organisation; enforcement needs further improvement.

• Propose to amend MF regulations to provide for non-bank custodians for gold or gold-related instruments of gold ETFs.
• Sponsor or an AMC shall invest in close-ended schemes as well, in order to bring uniformity across schemes. Currently, the investment by the sponsor or an AMC is mandatory in all schemes except close-ended schemes.

• Approved amendments to InvIT and REIT regulations.
• To provide for fast-track rights issue of units by REITs and InvITs.
• Alternative criteria proposed for InvIT investment manager qualification requirements.
• InvIT investment manager’s directors/partners/employees should have 30 years of combined relevant experience

The SEBI board approved the insertion of a "suitable explanation to Regulation 79 (Manner of creating pledge in Depository) under SEBI (Depositories and Participants) regulations, 2018, that the word pledge shall include re-pledge of securities for margin and/or settlement obligations of the client or such other purposes specified by the board from time to time."