Sebi may reintroduce open market buyback window in June 19 board meeting

The regulator may also consider reforms for agri-commodity derivatives, easier AIF approvals, and relaxed borrowing norms for mutual funds

The Securities and Exchange Board of India (Sebi) may approve the reintroduction of open market share buybacks, reforms for the agri-commodity segment, easier approvals for alternative investment funds (AIFs), and relaxed borrowing norms for mutual funds (MFs) at its upcoming board meeting on June 19, according to people familiar with the developments.

 

The reintroduction of buybacks through stock exchanges is expected to be a key measure, reversing the regulatory decision to phase out the route just a year ago, from April 2025.

 

At the time, the amendments followed concerns over unequal treatment of shareholders and implications arising from the then-prevailing taxation framework.

 

Sebi may now reintroduce the open market route via stock exchanges since the taxation of buyback proceeds has been rationalised effective April 1, making the buyback consideration taxable as capital gains in the hands of shareholders.

 

Under the previous regime, companies bore the buyback tax burden, which led to concerns that participating shareholders exited tax-free while others missed out. The regulator is also expected to approve additional measures to strengthen the reintroduction, including allowing a maximum completion timeline of 66 working days from the date of opening of the offer. Another safeguard expected is the freezing of shares and other specified securities held by promoters and their associates.

 

According to sources, Sebi may also allow select agri-commodity derivatives contracts to begin as financially settled instruments before transitioning to compulsory physical settlement after meeting specified thresholds.

 

Amid growing demands for measures to enhance liquidity in the agri-commodity market, Sebi may also approve higher client-level position limits for the segment and revise penalties in case of breaches. Sebi may double the existing client-level position limits across categories. For instance, the limit for commodities in the broad category may be increased to 2 per cent of deliverable supply from the current 1 per cent, while the limit for sensitive commodities may be raised to 0.5 per cent. The regulator is also considering tweaking the definition of the broad category of agri-commodities.

 

In the board meeting on Friday, the regulator may also allow MFs to use intraday borrowing lines for cash management to address liquidity gaps caused by differences in settlement timings for payouts and receivables.

 

Sebi may also simplify documentation and transmission norms for survivors of a deceased investor. It may double the threshold for simplified transmission — claims of up to ₹10 lakh in physical mode and ₹30 lakh for securities held in dematerialised mode.

 

A faster approval mechanism for private placement memoranda of AIFs, called the ‘green channel: AIF rollout upon document acknowledgement’ (Garuda) mechanism, is also expected to be approved at the upcoming meeting.

 

According to sources, Sebi may also approve revised norms on the code of conduct for whole-time members and officials to address potential conflict-of-interest issues. While most of these measures were cleared in the previous board meeting, some provisions specifically related to board members required government approval.

 

Emailed queries to Sebi remained unanswered until the time of press. 

Agenda for June 19 board meet 

• Reintroduction of open market  share buyback through exchange  just after one year of phase out
• Reintroduction on buyback expected after rationalisation of tax arbitrage
• Additional safeguards such as promoter freeze also expected 
• Revised code of conduct norms on conflict of interest also expected to be approved board meeting
• Select agri-commodity derivatives contracts may be allowed to be cash-settled in the beginning before transitioning to physical settlement
• Revisions in position limits for agri-commodities  also on the cards
• Intraday borrowings for  MFs may also be allowed