Sebi strengthens related party transactions rules, clears superior voting rights shares framework

The board also cleared frameworks for gold exchange and social stock exchange (SSE) for fundraising by social enterprises, Sebi said in a statement.

In a significant move, the Sebi board has approved amendments to norms to enable the introduction of Silver Exchange Traded Fund (ETFs) with certain safeguards in line with the existing regulatory mechanism for Gold ETFs.

In its meeting on Tuesday, the board expanded the definition of the related party transactions. It has decided to make it easier for acquirers to delist equity shares after an open offer.

Makarand Joshi, founding partner, MMJC and Associates, said that cases like Zee, DISH TV and a recent ruling by NCLT in the Videocon case have probably triggered changes in the RPT framework, however that can create a lot of anxiety in minds of the corporate world. ''Simply put, any transaction benefiting related party (even indirectly) would need the approval of audit committee and shareholders of a listed company. When the transaction is with the third party but may benefit related party would be difficult to identify and can sometimes lead to unnecessary allegations of violation on corporates,'' he added.

Further, it has been decided to tweak the criteria for determining 'Fit and Proper Person'. The criteria will be principle-based or/and rule-based as applicable. On gold exchange, Vijay Singhania, Chairman, TradeSmart said the currently, gold is traded only as a derivative instrument on all major bourses. In such bourses, the percentage of physical delivery of gold (in electronic form) is virtually nil. ''There is a strong need for nationwide Gold Spot Exchange with proper price discovery and standardization on quality norms. As of today, gold is mainly traded in case and the price of spot gold varies from state to state while GST rates remain consistent. Physical movement of yellow metal still remains risky and delivery of E-Gold or in Demat form is not very popular,'' he added.

Apart from these, the regulator cleared an Investor Charter for investors in the securities market. The Charter includes the vision statement of Sebi for investors, mission statement, rights and responsibilities of investors, do’s and don’ts for investors in the securities market among others.

It has been decided to allow resident Indians, other than individuals, to become constituents of foreign portfolio investors (FPIs) that are registered as AIFs in IFSCs. This is to facilitate investment in Indian securities markets through the FPI route by AIFs set up in International Financial Services Centres (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,'' the release said.

Among others, the regulator has given its nod for allowing Category III AIFs (Alternative Investment Funds) to calculate concentration norms based on the net asset value of the fund instead of investable funds for investment in listed equities of investee companies. Further, the regulator has approved amendments to the portfolio management rules to facilitate co-investment by investors of AIF through the portfolio management route. The portfolio manager providing co-investment services to investors of AIFs will invest 100 per cent of the assets under their management in unlisted securities and will be exempted from certain requirements under portfolio managers rules, including minimum investment amount, minimum net-worth etc, Sebi said The regulator has also approved authorising practising cost accountants to carry out share capital reconciliation audit of issuer companies. This would be in addition to qualified chartered accountants or practising company secretaries.