Default disclosure, PMS fund changes, NSE glitches: Everything that transpired at SEBI board meet

The SEBI board today took a string of decisions relating to market infrastructure, corporate actions, corporate governance and disclosures, among others.

Here are the key decisions taken and issues discussed at the SEBI board meeting. All the decisions announced come into effect from January 1, 2020.

PMS funds

SEBI said that the minimum investment required to invest in portfolio management services (PMS) funds will be doubled from Rs 25 lakh currently to Rs 50 lakh.

However, existing investments will be allowed to continue until the end of the PMS agreement, the regulator said in a release detailing decisions taken at its board meet on November 20.

SEBI also increased the minimum net worth requirement for PMS fund managers, from Rs 2 crore to Rs 5 crore.

Moneycontrol was the first to report on this development.

Rights issue

SEBI approved a proposal to reduce the time taken to complete a rights issue to nearly T+31 days from the existing period of T+55 to 58 days.

The markets regulator has also introduced dematerialised rights entitlements (RE) and trading of REs on stock exchanges.

"Shareholders holding shares in physical form will be required to provide details of demat account for credit of RES," SEBI said in a release after the conclusion of its board meeting.

Moneycontrol was the first to report on the development.

Loan disclosures

The markets regulator also approved a disclosure mechanism in case of default for listed companies, asking companies to report any interest or principal default within 24 hours after a 30-day window.

"The philosophy is that more and more information should be in the public domain, which guides investors and other stakeholders as to what is happening. It is an attempt to move towards openness and better disclosures,” SEBI Chairman Ajay Tyagi told reporters after the meeting.

NSE glitches

SEBI chairman said that the spate of technical glitches on the NSE is something that it is worried about and that the regulator will call the exchange for an explanation.

“That is repeatedly happening. We will call them soon [for an explanation]. This is something that should not happen,” said Tyagi.

Chairman/MD separation

SEBI is unlikely to provide an extension in its deadline for companies to separate the posts of chairman and MD in the listed space.

“These regulations were notified in May 2018 and will come into effect in April 2020,” Tyagi said.

SEBI’s reiteration comes in the wake of a push for an extension by India Inc, and Tyagi said that sufficient time has been given for corporates to plan for the change.

The separation of the two posts is considered as a way to differentiate the functioning of the board with the management of a company, minimising conflicts of interests and allowing boards to have greater control on company affairs.

Tyagi said that the argument that the separation of management and board may not always mean that corporate governance standards improve may be true but added that “that does not mean we will not try”.

“Out of top 500 companies, I believe two-thirds of companies are already meeting this requirement,” the SEBI chief said.

Proxy advisors

SEBI also discussed making changes to norms concerning proxy advisors and will take up the matter for further discussion at its next meeting, Tyagi said.

Moneycontrol reported on October 17 that SEBI may tweak norms to empower proxy advisory firms while also bringing in measures to mandate greater disclosures for such firms.

Karvy liquidity issue

The SEBI chairman also said the regulator was looking into the matter of the Karvy Group’s liquidity issue. Moneycontrol was the first to report on this.