SEBI's September 30 Board Meeting Anticipated to Feature Major Announcements                                                  on Derivatives and FPIs

Key Agenda Items for SEBI's September 30 Meeting Include Critical Decisions for Market Players and Intermediaries, with a Focus on Enhancing the Index Derivatives Framework

 

SEBI's September 30 Board Meeting Could Keep Market Players on Edge with Anticipated Key Decisions

The governing body of the Securities and Exchange Board of India (SEBI) is set to convene on September 30, with market players closely tracking the outcome. Major decisions are expected, including a pivotal move to strengthen the index derivatives framework.

The proposed framework aims to curb speculative trading behaviors that emerged with the daily expirations of index-derivative contracts. In SEBI’s consultation paper from July 30, changes such as weekly expiries, higher minimum contract values (initially set at Rs 15-20 lakh and later increased to Rs 20-30 lakh to deter retail investors), and rationalized strike prices were proposed. Both Finance Minister Nirmala Sitharaman and SEBI chief Madhabi Buch have emphasized the urgency of reform in the F&O (futures and options) segment, making it likely that the SEBI board will deliberate on these changes during this meeting.

A key reform also on the agenda is the launch of the Performance Validation Agency, which will verify the performance claims of intermediaries such as research analysts (RAs) and regulated algo providers. Despite technical challenges, SEBI’s chief has confirmed that the agency is in the pipeline, making this a highly anticipated outcome for RAs, investment advisors (IAs), and algo traders.

Another reform under consideration is the harmonization of regulations for public issues (Issue of Capital and Disclosure Requirements Regulations) and listing regulations (Listing Obligations and Disclosure Requirements Regulations), aimed at simplifying business procedures. This includes streamlining filings, improving director appointment processes, reclassifying promoter groups, and ensuring compliance with disclosure norms.

 

Other Potential Reforms

 

FPI Disclosure Norms: SEBI may ease compliance requirements for foreign portfolio investors (FPIs), as per its July 30 consultation paper. Instead of granular disclosures for FPIs with concentrated holdings, the proposal suggests that only FPIs from land-bordering countries (LBCs) will need to make detailed disclosures.

Offshore Derivatives and Sub-Funds: The inclusion of offshore derivative instruments and segregated portfolios of FPIs within the additional disclosure framework could also be on the table to prevent regulatory arbitrage.

IA/RA Compliance Easing: SEBI may reduce the educational and experience requirements for investment advisors and research analysts, remove net-worth criteria, and allow dual registration for both IA and RA roles.

Insider Trading Regulations: The definition of a "connected person" under insider trading rules could be broadened to include relatives, household members, and Hindu undivided families, among others.

Reintroduction of Summary Proceedings: SEBI is considering a faster response to clear-cut violations by intermediaries through summary proceedings, as proposed in a July 16 consultation paper.

 

New Asset Class: SEBI may introduce a new investment category that sits between a portfolio management service and a mutual fund, aimed at investors willing to take on higher risk.

Mutual Fund Reforms: Expected changes in the mutual fund sector include "Mutual Fund Lite" regulations for passively managed funds with fewer compliance requirements and the mandatory disclosure of risk-adjusted returns.

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