Sebi introduces framework for accredited investors in securities market

Regulator says appointment and removal of independent directors can be done through a special resolution of shareholders.

India's markets regulator on Tuesday announced decisions relating to independent directors, mutual fund regulations, and others at its board meeting.

The Securities and Exchanges Board of India (Sebi) will permit eligible resident Indian fund managers, other than individuals, to be constituent of Foreign Portfolio Investors.

The board further approved amendment to Mutual Fund regulations to provide for investment of a minimum amount as "skin in the game" in the MF schemes by Asset Management Companies (AMCs) based on the risk  associated with the scheme, instead of the current requirement of one per cent of the amount raised in new fund offer or an amount of Rs 50 lakh, whichever is less.

The regulator also approved the proposal to introduce a framework for ‘Accredited Investors’ in the Indian securities market, a class of investors who may be considered to be well informed or well advised about investment products.

Accredited investors could be individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body corporates based on financial parameters, Sebi said in a statement.

The regulator's board has also cleared amendments to the prohibition of insider trading regulations wherein the maximum reward for informants will be hiked to Rs 10 crore from Rs 1 crore at present.

Besides, changes have been approved to regulations governing Infrastructure Investment Trusts (InVITs) and Real Estate Investment Trusts (REITs).

To provide easy access to investors to participate in public/rights issues by using various payment avenues, Sebi has decided to permit banks, other than scheduled banks, to register as a banker to an issue.

The entities, other than banks, will be specified by the regulator from time to time.

It also approved amendments pertaining to regulatory provisions related to Independent Directors (IDs). Under the new policy, appointment or re-appointment  and removal  of  IDs can be done through a special resolution of shareholders for all listed entities.

The process to be followed by Nomination and Remuneration Committee (NRC),  while  selecting  candidates  for  appointment  as  IDs,  has been elaborated  and  made  more  transparent  including  enhanced  disclosures regarding  the  skills  required  for  appointment  as  an  ID  and  how  the proposed candidate fits into that skill set.

A cooling off period of three years has been introduced for Key Managerial Personnel  (and  their  relatives)  or  employees  of  the  promoter  group companies, for appointment as an ID.