Sebi clears PMS, FPI, accredited investor reforms; broadens avenues
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The Securities and Exchange Board of India (Sebi) approved far-reaching reforms relating to portfolio managers, foreign portfolio investors, accredited investors, market intermediaries and listed real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in a meeting on Thursday.
The Sebi board approved sweeping changes across the Portfolio Management Services (PMS) framework, including a move to allow portfolio managers to invest in initial public offerings (IPOs) and primary-market debt issuances.
The regulator also approved wider foreign portfolio investor (FPI) participation in physically settled, non-agricultural commodity derivative contracts as well as changes to the accredited investor framework and settlement regulations. The decisions were taken at the Board meeting held on September 24.
PMS gets wider investment universe
The PMS overhaul is one of the most important decisions approved by SEBI on Thursday.
Portfolio managers will now have access to a wider investment universe including IPOs and primary-market debt issuances. This move is aimed at expanding the universe of investments available to portfolio managers.
Sebi has also approved a route to enable PMS managers to invest in mutual fund schemes while the framework provides greater flexibility around investments in overseas securities and specified unlisted debt, subject to conditions.
Under the framework, PMS managers can invest up to 10% of client's assets under management in investment-grade unlisted debt with the client's consent. A new mutual-fund-only route, called Portfolio Management Services for Investment in Mutual Funds (PRIM) will have a minimum investment ticket size of ₹25 lakh.
The changes come after Sebi's consultation process around overhauling of PMS regulations, which had mooted the idea of widening the investment universe and easing some of PMS's operational requirements.
FPIs get access to physically settled commodity contracts
In another major approval, Sebi approved a framework for FPI participation in physically settled, non-agricultural commodity derivatives.
The move provides wider access to the commodities market for foreign investors and is aimed at boosting institutional participation, liquidity and market depth.
The framework contains safeguards around physical delivery. As per the proposal considered by Sebi, FPIs would have to square-off or roll over positions before the delivery period with arrangements to deal with positions that remain open. Sebi had put out a consultation paper around FPI participation in exchange-traded commodity derivatives in August. Its website currently lists that consultation paper, while the detailed implementation framework for Thursday's decision is awaited.
Accredited investor pool to expand
Sebi also approved changes aimed at widening the pool of accredited investors.
Under the new route individuals with securities-market assets of ₹5 crore and body corporates with such assets of ₹20 crore will be able to qualify as accredited investors along with the existing income and net-worth criteria.
The move is aimed at expanding the universe of accredited investors and encouraging participation in alternative investment funds (AIF).
Settlement rules, advertising code overhauled
The Board approved an overhaul of Sebi's settlement framework including a fast-track route for eligible settlements with amounts of up to ₹10 lakh.
The new rules offer a more formulaic approach to settlement amounts and provide more flexibility around settlement proceedings. SEBI has also increased the window for settlement application from 60 days to 90 days.
Separately, the regulator approved a common advertising code for market intermediaries. The framework, which will replace a range of entity-specific advertising requirements, also allows for celebrity endorsements at the brand or entity level, subject to conditions.
REITs, InvITs get overseas fundraising route
The Board also approved a proposal to enable REITs and publicly listed InvITs to issue depository receipts (DRs) in permissible overseas jurisdictions.
The move will provide these investment vehicles with another avenue to access overseas investors and raise capital.