Markets regulator SEBI on Tuesday decided to gradually phase out the buyback of shares by companies through the stock exchange route and also approved steps to boost governance at stock exchanges and other market infrastructure institutions.
These were among the proposals approved by the SEBI board during its meeting on Tuesday.
SEBI Chairperson Madhabi Puri Buch said the regulator has chosen the tender offer route for share buyback as the present mode is vulnerable to favouritism.
“This is a glide path and will lead to the phasing out of the present buyback mode (through the stock exchange route),” she told reporters here.
Currently, for share buyback, companies have both the options of the stock exchange and tender offer.
Besides, the SEBI board has decided to reduce the time taken for registration of FPIs to facilitate ease of doing business.
Norms will also be amended to facilitate sustainable finance in the country and curb ‘greenwashing’.
SEBI also said that it would be introducing an Investor Risk Reduction Access Platform to protect investors in case there are disruptions in trading services provided by a stock broker.
“The Investor Risk Reduction Access Platform is expected to be available from the third quarter of FY 2023-24,” the regulator said after its board meeting where the proposal was approved.
The watchdog said that in the event of disruption of trading services provided by a broker, clients face significant risk if they are unable to square off their open positions and/or cancel orders pending at the stock exchange, particularly when the markets are volatile.
“To provide such clients a facility to reduce the risk of open positions/pending orders during periods of disruption in services of their broker, it has been decided that stock exchanges shall introduce an Investor Risk Reduction Access Platform,” SEBI said in a release.
SEBI also said it will introduce a regulatory framework for Execution Only Platforms for direct plans of mutual fund schemes to further promote the penetration of such instruments as an investment vehicle.
Several entities, including investment advisers (IAs) and stock brokers, offer execution services like the purchase and redemption of direct plans of mutual fund schemes through the digital mode.
At present, there is no regulatory framework in place to facilitate the provision of such “execution only services” in direct plans of mutual fund schemes, independent of the regulatory requirements applicable to IAs and stock brokers, SEBI said in a statement issued after its board meeting.
The move would add convenience to investors in making investments through Execution Only Platforms (EOPs) and would help in ease of doing business for the platforms by mandating only such appropriate regulatory compliances as is required for the EOP activity.
Under the mechanism, an entity desirous of providing execution-only services in direct plans of mutual funds may be granted registration under either of the two categories—category 1 EOP as an agent of asset management companies registered with the industry body Association of Mutual Funds in India (AMFI) or category 2 EOP as an agent of investor, registered as a stock broker.
The detailed framework and the modalities of implementation of the same, nature of services that may be offered by the EOPs, cyber security requirements, pricing of services, and grievance redressal mechanisms, among others, would be notified through circulars.
