New Sebi chief Pandey's first board meeting: Key decisions and changes

Under new chief Tuhin Kanta Pandey, Sebi hikes disclosure bar for FPIs to Rs 50,000 crore in equity AUM, allows year-long advance fees for RAs/IAs, and reviews conflict of interest disclosure norms

The Securities and Exchange Board of India (Sebi), under the new leadership of Tuhin Kanta Pandey, held its first board meeting on Monday.

 

During the board meeting, Sebi decided to double the threshold for determining the foreign portfolio investors (FPIs) which need to make additional disclosures, according to the August 24, 2023, circular. The board has decided to increase the threshold for granular disclosures by FPIs from the current Rs 25,000 crore to Rs 50,000 crore assets under management (AUM) in the securities market.  Notably, FPIs holding more than 50 per cent of their equity AUM in single corporate to continue to make additional disclosures.

 

 

According to media reports, there were some concerns regarding FPI pullout after a government clarification declaring that FPIs will have to pay long-term capital gains tax at 12.5 per cent from April 1 as against the earlier rate of 10 per cent. The FPIs segment sold equities worth over Rs 3 trillion in the last 5 months. 

Sebi takes tough stance on malpractices

Sebi also discussed the matter on the disclosure of conflict of interest. According to a CNBC report, the market regulator said it will review the constitution of a High-Level Committee (HLC) on conflict of interest, focusing on disclosures related to property, investments, and liabilities of board members to strengthen governance and transparency.  

  The HLC has been tasked with reviewing and strengthening the framework for managing conflicts of interest among board members, the report said.  The objective is to improve transparency and governance standards within Market Infrastructure Institutions (MIIs). The committee is expected to submit its recommendations within three months of its formation.  The disclosure of conflict of interest has gained significance in the wake of the controversy involving Pandey’s predecessor, Madhabi Puri Buch, which surfaced after allegations made by now-shut US-based short-selling firm Hindenburg Research.

 

Both Madhabi Puri Buch and Sebi have denied the allegations. Under existing rules, all Sebi board members and their spouses are required to disclose their assets to the market regulator. However, the norms, introduced in 2008, are not subject to stringent scrutiny.  

RAs/IAs can now collect a year's fee in advance

Another big announcement made by Sebi board is that now registered research analysts (RAs) and investment advisors (IAs) can collect a year's fee in advance. So far, IAs were allowed to collect six months' fee in advance and RAs were could collect advance fee for just one quarter.

Appointment process for PIDs retained

According to CNBC report, Sebi has decided to retain the existing process for appointing Public Interest Directors (PIDs) at MIIs, requiring Sebi approval but not shareholder approval. MIIs must now record and submit reasons to Sebi if they choose not to reappoint an existing PID. Additionally, MIIs will set a minimum cooling-off period for key managerial personnel (KMPs) and Managing Directors before they can join a competing MII. However, Sebi will not mandate a cooling-off period for PIDs transitioning to other MIIs.

 

Bureaucrat-turned-regulator Pandey took over as the Sebi chief on March 1.