SEBI to amend buyback norms, bring stricter framework for Stock Exchanges, other market infrastructure institutions

MUMBAI, (PTI): To promote the ease of doing business, markets regulator Sebi on Tuesday approved amending share buyback norms, strengthening governance framework for stock exchanges and tweaking regulations to promote sustainable finance options.

Reduction in time taken for registration of Foreign Portfolio Investors (FPIs), introduction of Investor Risk Reduction Access Platform to protect investors in case of disruptions in trading services provided by a stock broker and governance norms for REITs and InvITs were among the other measures approved by Sebi board.

In a significant move to do away with the vulnerability of ”favouritism”, the watchdog has decided to gradually phase out buyback of shares by companies through the stock exchange route to address the drawbacks associated with the existing mechanism.

”These amendments aim to streamline the process of buy-back, create a level playing field for investors and promote ease of doing business,” Sebi said in a release.

Besides, the governance norms for stock exchanges and market infrastructure institutions will be amended, including categorising their functions into three verticals and rationalising the appointment process for public interest directors.

Sebi Chairperson Madhabi Puri Buch told reporters here that the regulator has chosen the tender offer route for share buybacks 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 said.

Under the open offer route, Buch said, ”we see that companies employ many clandestine prop-ups to support price, which we feel is not fair.” Also, the board has decided that companies would have to utilise 75 per cent of the proceeds of the buyback undertaken through the stock exchange route from the existing minimum of 50 per cent.

Regarding the stricter norms for market infrastructure institutions, the Sebi chief said that no wrongdoings happen in a vacuum.

”Any wrongdoing is known to the key people but they chose to walk away or look away as if it is not their job. But we want to make it their job,” she said.

The Sebi board also gave its nod for introducing a regulatory framework for ‘Execution Only Platforms’ for direct plans of mutual fund schemes. The move is aimed at further promoting mutual funds as an investment vehicle.

A number of entities, including investment advisers and stock brokers, offer execution services like purchase and redemption of direct plans of mutual fund schemes through the digital mode.

Also, the board approved a framework for adoption of cloud services by Sebi Regulated Entities (REs). It would be a principle-based framework containing nine broad principles which must be followed by REs for deploying cloud services. (PTI)