Mumbai: The Securities and Exchange Board of India (Sebi) will have its third board meeting on Monday under the current chief Ajay Tyagi. The key items on the board’s agenda are tweaking the norms for real estate and infrastructure investment trusts, nomenclature of mutual funds to nudge similar schemes to merge, hiring a chief economic advisor, taking stock of pending cases and review of action on shell companies. Here is a low-down on what is likely to be discussed:
REITs and InvITs
Further tweaks are on the cards for real estate investments trusts (REITs) and infrastructure investment trusts (InvITs) by allowing fund raising by issuing debt securities. This will be allowed for REITs and InvITs that are listed on national stock exchanges. The current norm requires a REIT to have a holding company with 51% stake; this will be changed to 50%. Currently, a REIT requires two projects under it; this may be changed to a single asset. More categories of investors could be allowed for REITs, including non-banking financial services and commercial banks.
The market regulator may finalise the recommendations of its mutual fund advisory panel and mandate strict definitions on how mutual funds are categorized, a move that might halve the number of schemes offered by asset managers currently. The capital markets regulator aims to ensure that an asset management company has only one product offering in each category. For instance, if a fund is called a large-cap fund then 80% of the money received will need to be invested in large-cap stocks. If a fund does not fall in the defined category, it will be shut.
After barring 331 companies from active trading based on a ministry of corporate affairs (MCA) communication on 7 August, the regulator has softened its stand. Out of the 162 actively trading companies, Sebi and exchanges are looking at the financials of 90 companies and according them personal hearings. These 90 companies are the ones which were more regular in their exchange filings. So far, the regulator has already examined and issued interim orders for forensic audit of more than 12 companies and in some cases their trading status has been restored to when they were barred. The board will review progress.
A mountain of 7,000 pending cases was one of the biggest challenges that Ajay Tyagi faced when he took charge as the Sebi chairman. Soon after joining, he beefed the enforcement department and put internal steps in place to ensure that enforcement proceedings are streamlined. This is being done by picking important cases and allowing smaller infractions to be settled via “consent". The Sebi board will take stock of the pace at which the cases are being resolved. The regulator is focussing on cases which have been referred by other enforcement agencies or the courts.
For the first time, the regulator is hiring a chief economic advisor, who will make recommendations on macro policy issues and matters that overlap with other regulators. In addition, Sebi has made all the posts vigilance sensitive after inputs from the chief vigilance commission (CVC).