Sebi Announces Corporate Governance Norms And Investor Measures Sebi Chairperson Madhabi Puri Buch said that the regulator has decided to set up an independent, government - sponsored backstop fund for corporate debt market
By Teena Jose •
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The Securities Exchange Board of India (SEBI), on Wednesday, has announced a slew of corporate governance related and pro-investor measures, ending the practice of individuals having permanent seats at boards of listed companies. The Sebi board reportedly approved amendments to the LODR Regulations to strengthen corporate governance at listed entities by enhancing disclosure and empowering shareholders through various mechanisms.
Addressing the media after the board meeting, Sebi Chairperson Madhabi Puri Buch said that the regulator has decided to set up an independent, government - sponsored backstop fund for the corporate debt market.
"If a single fund house faces an illiquidity issue, this corpus will not be available to it. It is only when the issue is spread across the market that we will press the button that will activate this corpus," said Buch, adding that the INR 33,000 crore Corporate Debt Market Development Fund (CDMF) will be set up to bail out debt funds in case of crisis.
According to media reports, aiming to safeguard investors' money from misuse by stock brokers, Sebi will put in place a framework for the Application Supported by Blocked Amount (ASBA) facility for investors in secondary market trading, similar to the existing system for IPO investors. Sebi has also strengthened the extant mechanism of sale, lease or disposal of an undertaking of a listed entity outside the 'Scheme of Arrangement' framework.
"Under the proposed framework, stock brokers will be allowed to either directly settle brokerage with the UPI clients or opt for Clearing Corporation's facility to deduct the standard rate of brokerage from the UPI block of clients. The framework would be implemented in a phased manner to facilitate a smooth transition in the market," said Buch as per the reports.
To improve governance and transparency to investors with respect to transactions involving conflict of interest, the regulator also approved that there should be a mandate for obtaining approval of 75% of investors by value for buying or selling of investments potentially involving conflict of interest.
Responding to this new developement, Abhishek Puri, founding member and head operations and compliance at Centricity, has said that, "This is a welcome move towards promoting transparency and accountability in the Indian financial market. The new norms aim to enhance disclosures by listed companies and strengthen the role of independent directors in decision-making processes. They also mandate the separation of the roles of chairperson and managing director/CEO, thereby reducing the concentration of power in the hands of a single individual. These measures are expected to improve investor confidence in the market, by ensuring that companies are managed in a fair and ethical manner. The increased focus on disclosures will enable investors to make informed decisions, while the stronger role of independent directors will help prevent conflicts of interest. Overall, these measures reflect SEBI's commitment to enhancing corporate governance standards in the Indian market, and are likely to contribute to its long-term growth and stability."
As per previous reports, earlier in February, it was proposed that if there is any director serving on the board of a listed entity without his/her appointment or re-appointment being subject to shareholders' approval during the last 5 years i.e., from April 1, 2019, the listed entity shall take shareholders' approval in the first general meeting to be held after April 1, 2024, for his/her continuation on the board of the listed entity.
