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Year-ender 2021: From share-based employee benefits to facilitating ease of doing business - key SEBI decisions taken this year
From share-based employee benefits to facilitating ease of doing business, market regulator Securities and Exchange Board of India (SEBI) has taken several important decisions over the course of the year.
From share-based employee benefits to facilitating ease of doing business, market regulator Securities and Exchange Board of India (SEBI) has taken several important decisions over the course of the year. SEBI is the regulatory body for securities and commodity market in India.
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Throughout this year, SEBI has undertaken certain decisions for public interest. As the year 2021 is coming to an end, let us see the key decisions undertaken by SEBI this year.
New SEBI (Share Based Employee Benefits and Sweat Equity)
This decision was taken in the SEBI Board Meeting on August 6, 2021. The Board approved the merger of SEBI (Issue of Sweat Equity) Regulations, 2002 (“Sweat Equity Regulations”) and SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”) into a single regulation called the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
While approving the said merger, the board also agreed to certain amendments to existing provisions. Under this, the companies will be allowed to provide share-based employee benefits to employees, who are exclusively working for such company or any of its group companies including its subsidiary or its associate.
Also, the companies will have flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa with the approval of the shareholders, subject to the condition that the switch is not prejudicial to the interest of the employees.
Furthermore, the maximum yearly limit of sweat equity shares that can be issued by a company listed on the main board had been prescribed at 15 per cent of the existing paid-up equity share capital within the overall limit not exceeding 25 per cent of the paid-up capital at any time.
Facilitating Ease of Doing Business in MIIs
SEBI's board gave its nod for amendments to regulations for alternative investment funds and market infrastructure institutions (MIIs), including stock exchanges, on its August 6 meeting, to facilitate the ease of doing business, as per a PTI report.
The board cleared two proposals, including doing away with the requirement of seeking Sebi's post-facto approval for acquisitions between 2-5 per cent shareholding for all eligible shareholders, the regulator said in a release.
The stock exchanges, clearing corporations and depositories would have to put in place appropriate mechanism to ensure compliance with fit and proper criteria under Sebi norms. "The provision applicable to listed stock exchanges/ depositories with regard to determination of ''fit and proper'' status of persons acquiring less than two per cent of its shareholding shall also be made applicable to unlisted stock exchanges/ depositories," the release said.
Framework for Social Stock Exchange
During the SEBI board meeting on September 28, 2021, the board approved the creation of the Social Stock Exchange (SSE), under the regulatory ambit of SEBI, for fund raising by social enterprises (SE). The framework for the SSE has been developed on the basis of the recommendations of a working group and a technical group constituted by SEBI.
Introduction of Silver Exchange Traded Funds in India:
The Board approved amendment to SEBI (Mutual Funds) Regulations, 1996 to enable introduction of Silver Exchange Traded Funds with certain safeguards in line with the existing regulatory mechanism for Gold ETFs during the meeting held on September 28, 2021.
Amendments to SEBI (Portfolio Managers) Regulations, 2020 and SEBI (Alternative Investment Funds) Regulations, 2012:
During the meeting on September 28, the board approved amendments to the SEBI (Portfolio Managers) Regulations,2020 and the SEBI (Alternative Investment Funds) Regulations, 2012, to facilitate Co-investment by investors of Alternative Investment Funds (AIF) through portfolio management route. The Portfolio Manager providing Co-investment services to investors of AIFs shall invest 100% of the assets under their management in unlisted securities and shall be exempted from certain requirements under SEBI (Portfolio Managers) Regulations, 2020, including minimum investment amount, minimum net-worth etc.
Permitting Resident Indians (other than Individuals) to become constituents of FPIs that are registered as AIFs in IFSCs
To facilitate investment in Indian securities markets through the FPI route by Alternative Investment Funds (AIFs) set up in International Financial Services Centres (IFSCs), the Board considered and approved the proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019 for permitting Resident Indians (other than individuals) to become constituents of FPIs that are registered as AIFs in IFSCs. Such Resident Indians shall be Sponsor/ Manager of the FPI and their contribution in the FPI shall be subject to conditions as specified by the Board.
Amendment to Schedule II of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 -Criteria for determining ‘Fit and Proper Person’
The Board considered and approved the agenda on criteria for determining ‘Fit and proper Person’. Fit and Proper Person criteria shall be principle based or/and rule based as applicable. The applicant or intermediary shall have competence and capability in terms of infrastructure, manpower requirements and financial soundness including meeting the net worth requirement, as provided in the regulations applicable to the applicant or the intermediary.The principle based criteria should include integrity, honesty, ethical behaviour, reputation, fairness and character.
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