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    Sebi Board Meet: 5 key issues that are likely to be taken up

    market | IST

    Sebi Board Meet: 5 key issues that are likely to be taken up

    The Securities and Exchanges Board of India (Sebi) on Tuesday is likely to take the final decision on the much-criticised April 10 circular- the foreign portfolio investor (FPI) regulations, after the HR Khan panel placed recommendations.
    The HR Khan Committee, which was formed to look into the demands of NRIs, has submitted an interim report to Sebi on KYC requirements.
    Sebi said the committee suggested that NRIs, overseas citizens of India and resident Indians should be allowed to hold non-controlling stakes in FPIs and no restriction should be imposed on them to manage non-investing FPIs or Sebi-registered offshore funds.
    FPI Regulations
    Under the Sebi (Foreign Portfolio Investors) Regulations, 2014 (FPI Regulations), NRIs are not eligible to obtain registration as FPIs.
    In relation to Indians as beneficial owners of FPIs, the circular has also confirmed the guidance, which was previously available under the Sebi FAQs that NRIs/OCIs cannot be beneficial owners of FPIs.
    The NRIs had earlier mentioned that out of the $450 billion that is being invested in the Indian market through the FPI route, only $75 billion has been mobilised. The remaining cannot be as the NRIs are not eligible, according to the April 10 circular.
    However, the market regulator on this had said it is "preposterous and highly irresponsible" to claim that $75 billion will move out of India because of the regulatory move.
    The HR Khan panel had addressed most of the concerns brought out by NRI fund manager. The panel in its report recommended lifting all restrictions that were imposed in the April 10 circular.
    Bond market borrowing
    The SEBI board is likely to discuss the framework for requiring the large corporates to raise 25 percent borrowing from the bond market. The proposal was brought to surface in June.
    The framework is proposed to be implemented from April 1 next year and the large corporates identified as on 31 March 2019 will have to garner at least 25 percent of their borrowings made in 2019-20 through bond market, Sebi had said in a consultation paper.
    This is part of an effort to reduce reliance on banks for financing corporates and simultaneously developing a liquid and vibrant corporate bond market.
    Given the current stage of development of bond market in the country, Sebi said that any mandatory requirement would need to be ‘light-touch’ in nature and would also need to provide enough leeway to the identified corporates to meet the mandatory requirement from the bond market.
    Commodity derivatives trading
    The regulator is likely to allow trading in commodity derivatives by foreign entities with the exposure to the physical commodity market. The proposal was brought to surface in September.
    With regard to the commodity derivatives markets, foreign entities may be allowed to hedge their exposures with derivatives trading in all commodities traded on Indian exchanges, barring the sensitive commodities.
    Under the proposal, the foreign entities, having actual exposure to Indian physical commodity markets, may be termed Eligible Foreign Entities (EFEs). A detailed set of norms for eligibility criteria, disclosure and KYC requirements, code of conduct and safeguards against any unwanted price fluctuations, has also been proposed.
    Settlement mechanism
    As a step to regulate the cases of insider trading, fraudulent cases and regulate unfair practices, the regulator will take up the cases on the facts under the proposed settlement norms.
    The regulator has, so far, not settled these cases. Willful defaulters are likely to be kept out of the purview of the settlement mechanism.
    Stricter framework for fiduciaries
    For the framework for fiduciaries or trusts, Sebi is looking for greater vigilance over chartered accountants, valuers and cost accountants even though the Institute of Chartered Accountants of India (ICAI) had opposed the regulator's move to consider CAs as fiduciaries.
    In July, the regulator had issued a consultative paper on the proposed SEBI (Fiduciaries in the Securities Market) (Amendment) Regulations for public consultation.
    The amended norms will be applicable for entities that undertake third-party fiduciary duties, assignments and engagements under the securities law.
    (With inputs from PTI)
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