Sebi to phase out buybacks through exchange route

The Securities and Exchange Board of India (Sebi) board met in Mumbai on Tuesday, 20 December 2022.

The Sebi board has approved amendments to the existing buyback regulations. The regulator plans to gradually phase out buyback through stock exchange route. It also increased the minimum utilization of the amount earmarked for buyback through stock exchange route from existing 50% to 75%. Buybacks will be undertaken through a separate window on stock exchanges till the time buyback is permitted through stock exchange.

The regulator also reduced the timeline for the completion of buybacks through the tender offer route by 18 days. Sebi said the requirement of filing the draft letter of offer with the regulator will be eliminated, saving time for listed firms.

Meanwhile, the board also has decided to introduce a regulatory framework for "Execution Only Platforms" (EOP) for direct plans of Mutual Fund schemes. This will provide convenience to investors in making investments through EOPs. It will provide appropriate investor protection mechanisms; and ease of doing business for the EOPs, by mandating only such appropriate regulatory compliances as is required for the EOP activity.

Further, the Sebi board considered introducing platform for risk reduction access to investors in case of disruption of trading services provided by a stock broker.

"In the event of disruption of trading services provided by a broker, clients face significant risk if they are unable to square off their open positions and / or cancel orders pending at the stock exchange, particularly when the markets are volatile. To provide such clients a facility to reduce the risk of open positions / pending orders during periods of disruption in services of their broker, it has been decided that stock exchanges shall introduce an Investor Risk Reduction Access Platform. A detailed framework for the platform shall be issued by way of Circular," Sebi said.

The Investor Risk Reduction Access Platform is expected to be available from the third quarter of FY 2023-24.

The Sebi board decided to strengthen focus and governance mechanisms in market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories.

According to Sebi, the functions of MIIs should be divided into the three categories of critical operations; regulatory, compliance, and risk management; and other functions, including business development. The key managerial persons in charge of functions in the first two categories should have the same level of authority as those responsible for the third category, Sebi said.

The Key Management Personnel (KMPs) heading the functions under the first two verticals to be at par in hierarchy with the KMPs heading the third vertical.

MII will give higher priority to the resource allocation towards the functions under the first two verticals over resource allocation towards the third vertical.

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