Sebi to overhaul governance, insider trading norms, streamline disclosures
Mumbai: The Securities and Exchange Board of India, or Sebi, is redrafting major regulations on governance, insider trading and also working to rationalize disclosures, said Sebi chairman Ajay Tyagi on Wednesday.
Regulations will be rationalized for ease of doing business, said Tyagi speaking at a capital markets summit organized by Ficci.
Sebi is primarily looking to simplify the language and reduce disclosures in its listing obligation and disclosure requirement (LODR) norms.
The materiality of disclosures is important and the market should not be burdened with onerous norms, said Tyagi.
He added that the capital markets regulator is releasing a draft for public comments.
“The principle of mandating disclosure of information regardless of materiality is a bad policy choice. It increases noise, clutters the coherence of relevant and material matters that are disclosed,” said Somasekhar Sundaresan, an independent counsel.
Speaking separately at the same conference, G. Mahalingam, a whole-time member at Sebi, warned about managing huge capital inflows.
“Huge amount of foreign inflows at a time when the currency has been substantially appreciating is something the regulators must be concerned about. We can think of maybe different ways of allowing these flows in under a calibrated system,” said Mahalingam.
He said that masala bonds - rupee denominated debt paper sold abroad - are likely to add to the nation’s external liabilities even if they don’t hold any risks to currency movement.
“When money flows into the country from foreign investments, we are attracting some risks and it is not currency risk alone. Masala bonds don’t hold any currency risks but at the same time, the external liability of the country goes up. This needs to be kept in mind,” said Mahalingam.
So far this year, the rupee has gained 5.7%, while foreign institutional investors bought $6.91 billion and $19.87 billion in equity and debt markets, respectively.
To be sure it is unclear, what role Sebi can play in managing the foreign flow and regulating masala bonds which are primarily regulated by RBI.
RBI in June had tightened regulations for masala bonds by setting a minimum maturity of three years for issuances of up to $50 million. Sebi in July had said that restrictions on foreign purchases on corporate bonds because of high ownership levels would also apply to masala bonds.
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