SEBI News Updates - March 2025

SECURITIES EXCHANGE BOARD OF INDIA ONLINE FILING SYSTEM FOR REPORTS UNDER REGULATION 10(7) OF THE TAKEOVER REGULATIONS

·       Circular Reference: SEBI/HO/CFD/DCR1/CIR/P/2025/0034, dated March 20, 2025.

·       Overview:

§  SEBI has updated the reporting mechanism for acquisitions or changes in voting rights under Regulation 10(7) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

§  The previous email-based submission process is replaced by an exclusive online filing system via the SEBI Intermediary Portal (SI Portal).

·       Phased Implementation

§  Phase 1: Applies to reports falling under specific exemptions (e.g. , inter-se transfers among immediate relatives and transfers involving promoters or persons controlling the target company).

§  Transition to Online Filing:

·       Acquirers, under Regulation 10(7), are required to submit reports along with supporting documents and a nonrefundable fee for acquisitions or increase in voting rights availing exemptions under Regulation 10.

·       These reports were required to be submitted via email previously. The current online filing system and fee payment through SI Portal aims to streamline submissions and improve processing efficiency.

§  Transition Period:

·       A parallel filing window from March 20, 2025, to May 14, 2025, during which both email and SI Portal submissions are accepted.

·       From May 15, 2025, all eligible reports must be filed solely through the SI Portal.

§  Fee Payment Changes:

·       Effective March 20, 2025, fee payments must be made through the SI Portal.

·       The previous payment module on the SEBI website has been decommissioned, and successful filing is confirmed only after the online fee is paid.

ONLINE FILING SYSTEM FOR REPORTS UNDER REGULATION 10(7) OF THE TAKEOVER REGULATIONS

§  Circular Reference: SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/35, dated March 20, 2025

§  Overview:

·       In a bid to enhance market transparency, SEBI has revised the disclosure format for dematerialized shareholdings.

·       The updated format and additional requirements will be applicable from the quarter ending June 30, 2025.

§  Key Revisions:

·       Amendments have been made to Tables I-IV of the shareholding pattern.

·       Entities must now disclose details regarding encumbrances and non-disposal undertakings (NDUs), including the total number of pledged shares.

·       The definition of convertible securities now explicitly covers Employee Stock Option Plans (ESOPs), with adjustments made to related column headings.

·       A new column is introduced to capture the fully diluted share count, factoring in warrants, ESOPs, and convertible securities.

·       Additional footnotes have been included; for example, Table II now notes promoters or promoter groups with NI L shareholding.

·       SEBI has introduced partial modifications to the disclosure format prescribed under Annexure-2 of Section II-A of Chapter II of the Master Circular No. SEBI/HO/CFD/PoD2/CIR/P/0155, dated November 11, 2024, based on inputs from depositories, stock exchanges, and market participants.

CONSULTATION PAPER ON REVIEW OF PROVISIONS PERTAINING TO EBP AND RFQ PLATFORMS

·       Circular Reference: Issued on March 20, 2025.

·       Overview:

§  SEBI has launched a public consultation paper aimed at revising the regulatory framework for Electronic Book Provider (EBP) and Request for Quote (RFQ) platforms.

Consultation Details:

§  The paper is divided into two parts:

·       Part A: Focuses on proposals for the EBP platform.

·       Part B: Deals with proposals related to the RFQ platform.

·       Proposals are centered on enhancing transparency and streamlining market operations.

·       Stakeholders are invited to submit feedback by April 10, 2025.

CONSULTATION PAPER ON AMENDMENTS TO ICDR AND SBEB & SE REGULATIONS

§  Circular Reference: Issued on March 20, 2025.

§  Overview:

·       This consultation paper proposes changes to the ICDR Regulations, 2018 and the SBEB & SE Regulations, 2021 to streamline and simplify public issue procedures and clarify aspects of equity share eligibility.

Key Proposals:

·       Introduction of a minimum holding period for equity shares involved in an Offer for Sale (OFS).

·       Detailed clarifications regarding ESOPs, particularly those granted to founders prior to filing the draft red herring prospectus (DRHP).

Stakeholders are invited to provide their comments by April 10, 2025.

CONSULTATION PAPER ON FACILITATION FOR SEBI-REGISTERED STOCK BROKERS TO UNDERTAKE SECURITIES MARKET RELATED ACTIVITIES IN GIFT CITY

·       Circular Reference: Issued on March 21, 2025.

·       Overview:

§  SEBI has proposed regulatory changes to support a new business model for stock brokers operating in Gujarat International Finance Tec-City (GIFT City).

·       Key Proposals:

·       Elimination of the need for a separate SEBI approval for engaging in securities market-related activities within the IFSC.

·       Introduction of a Separate Business Unit (SBU) structure to clearly segregate domestic operations from those in GIFT City.

·       Regulatory oversight for the SBU shall be exclusively under the designated regulatory authority governing the GIFT-IFSC. Compliance requirements include ring-fencing measures and a dedicated framework for investor protection.

·       Stock brokers must maintain separate accounts for the SBU, ensuring net worth calculations exclude the SBU’s financials from the Indian stock broking entity’s assessment.

·       Investor protection mechanisms such as the Investor Protection Fund (IPF), stock exchange grievance redressal systems, and SEBI’s SCORES platform will not be applicable for investors engaging with the SBU in GIFT-IFSC.

·       Stock brokers with existing subsidiaries or joint ventures in GIFT-IFSC may transition to an SBU model, eliminating the need for separately approved entities.

The consultation paper accepts public comments until April 11.

REVISED MINIMUM APPLICATION SIZE FOR ZERO COUPON/ZERO PRINCIPAL INSTRUMENTS UNDER THE SOCIAL STOCK EXCHANGE FRAMEWORK

·       Circular Reference: SEBI/HO/CFD/PoD-1/P/CIR/2025/33, dated March 19, 2025.

·       Overview:

§  SEBI has reduced the minimum application size for Zero Coupon/Zero Principal (ZCZP) Instruments from INR 10,000 to INR 1,000.

·       Objective:

§  This reduction is intended to promote wider investor participation and support social enterprises, as recommended by the SSE Advisory Committee.

·       Effective Date: The revised application size is effective immediately.

·       Background:

§  SEBI had previously introduced the Social Stock Exchange (SSE) framework through Circular No. SEBI/HO/CFD/PoD1/P/CIR/2022/120, dated September 19, 2022.

§  The framework was later amended via Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2023/196, dated December 28, 2023.

§  Based on feedback from public consultations and recommendations from the SSE Advisory Committee, SEBI has now revised the minimum application size for ZCZP Instruments.

·       Regulatory Authority:

§  The Circular has been issued under the powers conferred to SEBI by Section 11 and Section 11(A) of the SEBI Act, 1992, read with Regulation 299 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

·       Revised Provision:

§  The relevant provision under Paragraph 1(AC), Point (4) of the previous SEBI circular has been updated to reflect the new minimum application size of INR 1,000.

FRAMEWORK ON ALIGNING AMC DESIGNATED EMPLOYEES’ INTERESTS WITH UNITHOLDERS

·       Circular Reference: SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/36, dated March 21, 2025.

·       Overview:

§  SEBI has updated the framework to better align the interests of designated employees at Asset Management Companies (AMCs) with those of unitholders.

·       Key Amendments:

§  Designated employees are required to invest a portion of their gross annual CTC (inclusive of salary, perks, bonus, and non-cash benefits) in AMC-managed mutual fund units.

§  The minimum investment requirement shall be calculated after deducting income tax and statutory contributions (such as PF and NPS).

§  For employees managing liquid funds, up to 75% of this mandatory investment can be allocated to higher-risk schemes, subject to monthly risk assessments.

§  Adjustments have been made to lock-in periods, including provisions for early redemption upon retirement or resignation under specified conditions.

§  If a designated employee resigns or retires before superannuation, the lock-in period is reduced to one year from employment termination or three years from the date of investment, whichever is earlier.

§  Units in close-ended schemes will remain locked until the scheme’s tenure ends, even if the designated employee retires or resigns.

§  Redemption of units in open-ended schemes post-lock-in shall comply with SEBI (Prohibition of Insider Trading) Regulations, 2015, including pre-clearance requirements where applicable.

§  AMCs must disclose the total compensation invested in these units on a quarterly basis on the stock exchange’s website.

§  Each scheme must disclose the aggregate amount of compensation invested in mutual fund units by designated employees, with quarterly updates published within 15 days after each quarter-end.

§  Additional measures are in place to address misconduct, with recommendations to be forwarded to SEBI following an internal review.

§  The Nomination and Remuneration Committee (or an equivalent AMC Board body) will assess violations of the Code of Conduct, fraud, or gross negligence and submit recommendations to SEBI after Trustee approval.

COMPETITION COMMISSION OF INDIA

DRAFT COMPETITION COMMISSION OF INDIA CONDUCT RULES, 2025

§  Circular Reference: Draft document released on March 07, 2025.

§  Overview:

·       The Competition Commission of India (CCI) has issued a draft of its new Conduct Rules to reinforce ethical standards, enhance transparency, and ensure accountability among its officers and stakeholders.

·       These rules are designed to provide clear guidance on acceptable behavior, manage conflicts of interest, and establish robust internal governance mechanisms.

·       The draft also aims to align CCI's operational guidelines with international best practices in competition law enforcement.

§  Key Provisions:

§  Code of Conduct and Ethical Standards:

·       Establishes a comprehensive framework outlining the ethical obligations of CCI officers and staff.

·       Emphasizes integrity, impartiality, and fairness in all decision-making processes.

·       Sets forth principles to avoid any appearance of bias or preferential treatment.

·       Includes explicit guidelines on professional conduct in digital communications and social media use by officers to maintain institutional credibility.

§  Conflict of Interest Guidelines:

·       Provides detailed procedures for identifying, disclosing, and managing conflicts of interest.

·       Requires officers to recuse themselves from any matter where personal interests may interfere with official duties.

·       Mandates regular declarations of interests to maintain transparency.

§  External Engagement and Interaction Protocols:

·       Introduces clear rules for interactions with market participants, regulated entities, and other stakeholders.

·       Prohibits acceptance of gifts, hospitality, or any benefits that could be perceived as influencing decision-making.

·       Specifies limits and conditions under which external communications may occur, ensuring all engagements are conducted in an open and accountable manner.

§  Confidentiality and Data Protection:

·       Reinforces the obligation to protect sensitive information and maintain confidentiality in all communications and internal operations.

·       Establishes protocols for the secure handling of confidential data, particularly in relation to competitive and marketsensitive information.

§  Transparency and Accountability Measures:

·        Enhances disclosure norms by requiring detailed public reporting on steps taken to address conflicts of interest and any incidents of misconduct.

§  Consultation Process:

·       The draft rules are open for public consultation, inviting comments and suggestions from industry stakeholders, experts, and the general public.

·       Stakeholders are provided with a defined period to review the document and submit their feedback, ensuring that a broad range of perspectives is considered before finalization.

·       The consultation process will also include expert panel discussions and public hearings to facilitate more interactive feedback collection.

§  Implementation Outlook:

·       Post-consultation, the CCI will assess the feedback received and finalize the conduct rules accordingly.

·       The finalized rules will be implemented across the Commission to strengthen internal processes and enhance overall market integrity.

·       A structured transition plan will be introduced to assist stakeholders in adapting to the new rules, including workshops and awareness programs for CCI officers.

RESERVE BANK OF INDIA

REVISED NORMS FOR GOVERNMENT GUARANTEED SECURITY RECEIPTS (SRS)

·       Circular Reference: As per the circular released on March 29, 2025 which is updating the Master Direction on Transfer of Loan Exposures (MD-TLE), 2021, dated September 24, 2021.

·       Overview:

§  The MD-TLE, which sets prudential guidelines for the transfer of loans to Asset Reconstruction Companies (ARCs), has been updated to introduce a differentiated approach for SRs backed by the Government of India.

§  Previously, the prudential provisions—such as reversal of excess provision and valuation norms detailed in paragraphs 76, 77, and 77A—applied uniformly to all SRs, including those with sovereign guarantee.

·       Key Provisions for Government-Guaranteed SRs:

§  Excess Provision Reversal:

·       If a loan is transferred to an ARC at a value exceeding its net book value (NBV), the excess provision may be reversed to the Profit and Loss Account in the year of transfer, provided the sale consideration consists solely of cash and Government Guaranteed SRs.

·       The non-cash component (i.e. , the SRs) will be deducted from the CET 1 capital, and dividends will not be payable on this portion.

§  Periodic Valuation:

·       SRs will be valued periodically using the Net Asset Value (NAV) declared by the ARC, which is determined based on the recovery ratings of the instruments.

·       Any unrealized gains recognized in the Profit and Loss Account on fair valuation shall be deducted from the CET 1 capital, with no dividend distribution allowed on these gains.

§  Valuation Post-Guarantee:

·       Any SRs that remain outstanding after the final settlement of the government guarantee or upon expiry of the guarantee period (whichever comes first) will be valued at one rupee (₹1).

§  Conversion During Resolution:

·       If SRs are converted into another type of instrument as part of a resolution process, their valuation and provisioning will be governed by the provisions outlined in paragraph 19 of Annex 1 to the Prudential Framework for Resolution of Stressed Assets dated June 7, 2019.

§  Newly Added Clause in MD-TLE:

·       The RBI has introduced Clause 76A, allowing lenders to reverse the entire excess provision to the Profit and Loss Account in the year of transfer, provided the consideration consists only of cash and Government Guaranteed SRs. The non-cash component of these excess provision shall be deducted from CET1 capital, and no dividends shall be paid out of this component.

·       A new Clause 77B has been added, confirming that the valuation of Government Guaranteed SRs shall be valued by reckoning the NAV-based approach and that unrealized gains in the profit and loss account on account of fair valuation of such investment must be deducted from CET 1 capital and no dividends shall be paid out of such unrealized gains.

§  Applicability:

·       These revised provisions are effective immediately and apply to all existing and future investments involving SRs guaranteed by the Government of India, for the duration of the guarantee’s validity by the Government on the concerned SRs.

·       The updated circular effectively amends the relevant sections of the MD-TLE as detailed in the accompanying annex.

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

DISCLOSURE OF INFORMATION ON CARRY FORWARD OF LOSSES IN INFORMATION MEMORANDUM (IM)

·       Circular Reference: IBBI/CIRP/83/2025, dated March 17, 2025.

·       Overview:

§  The IBBI has mandated an enhanced disclosure framework in the Information Memorandum (IM) regarding the carry forward of losses under the Income Tax Act, 1961.

·       Key Directives:

§  Dedicated Section:

·       All Insolvency Professionals must include a dedicated section in the IM that explicitly details the carry forward losses available to the corporate debtor.

§  Required Details:

·       Quantum of Losses: Clearly state the total carry forward losses available.

·       Breakdown: Provide a breakdown of losses under specific heads as per the Income Tax Act, 1961. Time Limi ts: Specify the applicable time limits for utilizing these losses.

·       No Loss Scenario: If no carry forward losses are available, the IM must explicitly mention this fact.

·       Objective:

§  This enhanced disclosure is aimed at offering potential resolution applicants a clearer understanding of the corporate debtor’s financial position, thereby facilitating the development of more informed and viable resolution plans.

MANDATORY USE OF BAANKNET (FORMERLY EBKRAY) AUCTION PLATFORM FOR LIQUIDATION

·       Circular Reference: IBBI/L IQ/84/2025, dated March 28, 2025.

·       Overview:

§  In line with prior directives, the IBBI now mandates that all auctions for asset sales in liquidation cases be conducted exclusively via the Baanknet auction platform (formerly eBKray). This directive is effective for auction notices issued on or after April 1, 2025.

·       Key Directives:

§  Platform Exclusivity:

·       All Insolvency Professionals must use the Baanknet auction platform for any auction notice issued on or after April 1, 2025.

§  Auction Notice Requirements:

·       The notice must clearly state that:

·       Prospective bidders are required to submit all necessary documents, including a declaration of eligibility under Section 29A of the Insolvency and Bankruptcy Code, via the electronic platform.

·       The Earnest Money Deposit (EMD) must be deposited through the Baanknet platform.

·       Ineligible bidders will have their EMD forfeited.

§  Additional Guidance:

·       For any clarifications, IPs can refer to the FAQs and guidance documents available on the IBBI website or contact the support team via the provided phone number and email address.

·       Previous IBBI Circular No. IBBI/L IQ/81/2025 dated 10th January 2025, directed the use of the Baanknet platform, and mandated the listing of all unsold assets in ongoing liquidation cases by 31st March 2025.

§  Objective:

·       This measure is intended to streamline the liquidation process, ensuring transparency and efficiency in the sale of assets during liquidation.