The Securities and Exchange Board of India (SEBI) is set to convene a crucial board meeting on September 30, a gathering that is being closely watched by market participants and regulators alike. This meeting is significant as it is the first since allegations were leveled against SEBI Chairperson Madhabi Puri Buch by Hindenburg Research.
Controversy Surrounding Madhabi Puri Buch
The meeting comes amid a cloud of controversy surrounding Chairperson Madhabi Puri Buch. Hindenburg Research has alleged that Buch and her husband, Dhaval Buch, had investments in offshore funds managed by Vinod Adani, the brother of Gautam Adani. These allegations suggest that these funds were used to manipulate the stock prices of Adani Group companies. Both Buch and her husband have denied these allegations, stating they have complied with all SEBI disclosure requirements.
Additionally, there have been complaints from SEBI employees regarding a stressful and toxic work environment, which the regulator has acknowledged and promised to address internally.
Key Decisions Expected
The SEBI board meeting is expected to make several key decisions that could significantly impact the securities market. One of the major reforms on the agenda is the strengthening of the index derivatives framework. This includes proposals to switch from daily to weekly expiries of index-derivative contracts, increase the minimum contract value to deter retail trading, and rationalize strike prices. These changes aim to curb gambling-like trading behaviors and stabilize the market.
Another significant development is the potential launch of a performance validation agency, which will authenticate the performance claims of investment advisors and portfolio managers. Although technical difficulties have delayed its setup, the agency is expected to enhance transparency and trust in the investment advisory sector.
The meeting will also discuss harmonization of regulations on public issues and listing obligations to ease the process of doing business. This includes streamlining filings and disclosure procedures, timelines for appointments of directors, and reclassification of promoters and promoter group entities.
Foreign Portfolio Investors (FPIs) may see easier compliance norms, including simplified disclosure requirements and the potential inclusion of offshore derivative instruments to prevent regulatory arbitrage. Investment advisors and research analysts may also benefit from reduced educational and experience requirements and the removal of net-worth requirements.
New Market Instruments and Regulatory Changes
SEBI is expected to introduce a new market instrument, Mutual Fund Lite (MF Lite), which will bridge the gap between mutual funds and portfolio management services. MF Lite will be applicable to mutual funds that manage only passive schemes, aiming to provide more investment options for investors with higher investable amounts.
The regulator may also extend the definition of connected persons under insider trading regulations to include relatives, those sharing a household with a connected person, and Hindu undivided families. Additionally, there could be a reintroduction of summary proceedings to handle violations by intermediaries more swiftly.
