Sebi on Thursday decided to provide flexibility in the framework for large corporations to meet financing needs through the issuance of debt securities and also extended the timeline for investment advisers to comply with enhanced qualification and experience requirements. Also, the regulator will streamline the framework for credit of unclaimed amounts of investors in listed entities other than companies, REITS, and InvITs to the Investor Protection and Education Fund (IPEF) along with the process of refund from the IPEF.
Besides approving these proposals, Sebi board, at its meeting on Thursday, also discussed various trends in the securities market, including technological trends, as well as the regulator's approach to proactively plan for the same going forward, according to a release. The board has given its nod for providing flexibility in the framework for large corporates to meet their financing needs from the debt market through a few changes in the existing framework.
Under the new framework, Sebi said that a higher monetary threshold would be specified for defining large corporations, thereby reducing the number of entities qualifying as large corporations. Additionally, it has been decided to remove penalties on large corporations that are not able to raise a certain percentage of incremental borrowing from the debt market, and plans to introduce incentives and moderated disincentives.
In a bid to facilitate ease of compliance as well as ease of doing business, the board has decided to retain the requirement that compliance with the framework will be met over a contiguous block of three years. Further, it has been decided to dispense with the requirement for large corporations to file a statement identifying itself as a large corporation and a statement regarding compliance with the framework.
As per the current rules, large corporations are those that need to have an outstanding long term borrowing of at least Rs 100 crore, a credit rating of 'AA and above', and a target to finance themselves with long term borrowings (above one year). To deepen the bond market, the regulator had mandated large corporates to meet one-fourth of their financing needs from the debt market.
As per the release, the board has also cleared a proposal to extend the timeline by two years till September 2025 for compliance with enhanced qualification and experience requirements for investment advisers. Individual investment advisers, principal officers of non-individual investment advisers, and persons, who are with the investment advisers and associated with investment advice, are required to comply with enhanced qualification and experience requirements.
To further streamline the credit of unclaimed amounts and provide for claims of such unclaimed amounts, the board has approved amendments to rules about the IPEF, disclosure, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This is aimed at prescribing a uniform process of a claim for such amounts in a streamlined manner for the ease and convenience of investors. Also, Sebi said that investors may approach the debt-listed entity, REIT and InvIT to claim their unclaimed amounts, thereby ensuring minimal disruptions in the claim process for investors.
Further, the amendments are aimed at creating a regulatory framework for the segregation of unclaimed amounts of investors in the IPEF facilitating the utilisation and processing of such amounts in the manner prescribed by the board. The proposal for the transfer of unclaimed amounts lying in an escrow account for more than seven years, to the IPEF for debt-listed entities was approved by the Sebi board in its meeting in September 2022. Similarly, the proposal to transfer the unclaimed or unpaid amounts to investors in REITs and InvITs to IPEF were approved by the regulator in its meeting in December 2022. Accordingly, changes were made in the REITs and InvIT Regulations.
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