SEBI Board Meet: FPI Framework Rationalised, Norms For Credit Rating Agencies Amended (2024)

CARE Ratings said that the amendments made for credit rating agencies will empower them to do their job better.

“We have two types of instruments we rate. Capital market instruments and bank loans. For capital markets, the information on defaults is well spread out. But there is a lot of information asymmetry in the bank loan market,” said TN Arun Kumar, interim chief executive officer of CARE Ratings.

The intention from the SEBI for better enforcement in insider trading matters is clear but some gaps on the protection side of the informants still remain, according to Moin Ladha, Partner at Khaitan & Co.

“The definition of the term informant though is very very broad,” he said. “While there are noble provisions for confidentiality, the protection against victimisation is only included as an obligation to be covered in the Code of Conduct—a document internal to organisations. So there may be a certain level of suspicion in protection that this Code will provide.”

SEBI’s deicision to completely do away with the broad-based eligibility for FPIs is a “pleasant surprise”, according to Richie Sancheti of Nish*t Desai Associates.

“Clearly SEBI has been taking feedback on where the pain points for FPIs were. And there have been significant number of FPI clients, who we advise, who have struggled to meet the broad-based criteria,” he told BloombergQuint. “This is a very welcome move. We need to look at the fineprint on how this will be implemented.”

SEBI said that the current appraoch of allowing buybacks will continue if the post-buyback debt to equity ratio is not more than 2:1.

In case it is exceeding 2:1 on a consolidated basis then the buyback would only be permitted if:

• Post buyback the debt-to-equity ratio is not more than 2:1 on a consolidated basis after excluding subsidiaries that are NBFCs and HFCs regulated by RBI.
• All such excluded subsidiaries have a debt-to-equity ratio not exceeding 6:1 on a standalone basis.

SEBI has approved the SEBI (Prohibition of Insider Trading) (Third Amendment) Regulation, 2019.

Key features of the new norms:

• An informant will be a person voluntarily submitting a form that details credible, complete and original information regarding an act of insider trading.
• The informant will be mandated to disclose the source of original information and provide an undertaking that it was not sourced from any person employed with SEBI other regulator.
• The regulator will give a reward only if the information provided leads to a disgorgement of at least Rs 1 crore. The total monetary award will be 10 percent of the monies collected by shall not exceed Rs 1 crore. An interim reward not exceeding Rs 10 lakh may be given at the stage of issuance of the final order by the SEBI.
• The information provided by the informant will be exempted from disclosure under the Right to Information Act.
• An independent office separate from the investigation and inspection wings will be established by SEBI to devise a police relating to the receipt and registration of the Voluntary Information Disclosure Form and serve as a medium of exchange between the informant and Board. This will be the Office of Informant Protection.