SEBI slashes IPO listing time to 3 days, defers proposal to overhaul TER on MFs; key highlights here

The SEBI board has approved the proposal for reducing the time period for listing of shares in a public Issue from the existing six days to three days, from the date of issue closure (T Day). The revised timeline of T+3 days will be made applicable in two phases. The new listing timeframe will be voluntary for all public issues opening on or after September 01, 2023 and mandatory for the ones on or after December 01, 2023, according to the capitals markets regulator.

"The decision to reduce the timeline for listing follows extensive consultation with all stakeholders, including anchor investors, registrar and transfer agents, broker-distributors, banks, etc. Extensive stress testing has been done to confirm that the transition to T+3 would be smooth," said SEBI.

With the approved reduction in the listing time, issuers will receive funds and allottees will receive securities in a shorter period of time, according to SEBI.

SEBI Board Meeting Outcome: Other key decisions

1. Proposal to regulate TERs on MFs deferred

SEBI has also deferred the proposal to regulate the total expense ratio charged by mutual fund houses, which was widely anticipated to be overhauled. ‘’The issue around TER was discussed in depth. SEBI will publish a new consultation paper on TER regulations'', said Madhabi Puri Buch, SEBI Chairperson. The old draft TER proposal will undergo a significant change and new regulations will be published soon, according to SEBI.

2. Board representation for retail investors under REITS/InvITs

SEBI will introduce board nomination rights for unitholders of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). ‘’The board approved amendments to the SEBI (InvITs) Regulations, 2014 and SEBI (REITs) Regulations, 2014 to provide nomination rights to unitholders holding ten percent or more of the total outstanding units of the InvIT/REIT, either individually or collectively, on the board of directors of the Investment Manager/Manager. This ensures pro-rata rights to all unitholders,'' said the regulator.

The sponsor who sets up the InvIT/ REIT, monetizes its assets by transferring them to the InvIT/ REIT and exerts control over the decisions of the InvIT/ REIT through a significant shareholding in the Investment Manager/Manager.

Currently, SEBI Regulations mandate the sponsor to hold a minimum of 15 per cent units for a period of at least three years from the date of listing of units.

The board has also approved the sponsor of InvIT/ REIT "be required to hold a certain minimum unitholding on a reducing scale for the entire life of the InvIT/ REIT". The mandatory minimum unitholding shall be locked-in and be unencumbered, said SEBI. 

Additionally, in order to provide an additional exit option for the sponsor of InvIT/ REIT, the SEBI board approved the proposal for introduction of self-sponsored investment manager/manager or an investment manager/manager who also takes on the responsibilities of the sponsor of InvIT/ REIT.

3. Additional disclosures from certain FPIs 

SEBI has decided to mandate enhanced disclosures from certain class of foreign portfolio investors (FPIs), including furnishing granular level details about ownership and economic interests. The new norms will be applicable for FPIs that concentrate holdings in a single corporate group.

Under the proposed framework, FPIs with concentrated single group equity exposures or significant equity holdings will be mandated to make additional granular disclosures. Such FPIs will be required to provide granular level disclosures regarding ownership, economic interest, and control rights on a full look–through basis, the regulator said in a release.

The regulator said that FPIs holding more than 50 per cent of their equity Asset Under Management (AUM) in a single corporate group or FPIs that individually, or along with their investor group hold more than ₹25,000 crore in the Indian markets would be required to comply with the new requirements.

The funds owned by the government, sovereign wealth funds, pension funds and public retail funds will be exempted, said the market regulator.

3. Better redressal for investor grievances

SEBI will strengthened the investor-grievance mechanism by integrating the SEBI Complaint Redressal System (SCORES) with the online dispute resolution (ODR) mechanism. SEBI will reduce timelines and introduce auto-routing of the complaint to concerned regulated entities and auto-escalation of complaintsin case of non-adherence to the prescribed timelines by the regulated entity.

SEBI will also provide two levels of review. The first review will be by the designated body if investor is dissatisfied with resolution provided by concerned regulated entity. The second review will be by SEBI if the investor is still dissatisfied after the first review.

4. Listing and voluntary delisting of NCDs

The regulator has approved the introduction of provisions related to the listing of non-convertible debt securities and voluntary delisting of NCDs. ‘’If an entity with listed debt securities has outstanding unlisted NCDs as on December 31, 2023, the entity will have the option to list them, but it would not be mandatory to do so,'' said SEBI. 

Also, entities having privately placed, listed debt securities wherein the number of debt security holders is less than 200, will be eligible to delist their debt securities under this framework.

5. Direct participation by clients in LPCC

Since timely availability of funds and securities is critical in a repo market, direct participation of both borrowers and lenders can widen the market, said the regulator. Accordingly, the SEBI board has approved the proposal to additionally facilitate participation by entities desiring direct participation (not through a clearing member) in repo transactions in corporate bonds of the LPCC.