News: The Securities and Exchange Board of India (SEBI) has given the green light to a new regulatory framework for index providers. This initiative is designed to increase transparency and control in the index provider sector. The decision was taken at a board meeting on Saturday.
Key changes in the regulatory framework
SEBI has implemented a landmark reform that will force index providers to come under government supervision. Originally, SEBI had proposed to bring all index providers under its purview. However, after careful consideration, the Board has chosen to focus on index providers that manage significant assets under management. Therefore, such providers are obliged to comply with the newly established regulatory framework.
Postpone other decisions
Further, SEBI has announced a delay in taking any decision regarding exemption framework and relaxation of NRI investment norms. These issues will be subject to further analysis and discussions in future discussions before a decision is reached.
A new structure for small and medium REITs
SEBI has also issued a new framework specifically designed for small and medium-sized real estate investment trusts (REITs). In this framework, transfer of existing fractional ownership will be a voluntary process. Previously, SEBI had suggested that platforms facilitating fractional ownership would require mandatory registration to operate. However, under the new guidelines, these platforms have the flexibility to register as small and medium REITs.
Eligibility and minimum corpus requirements
To qualify for the small and medium REIT category, the value of the property must meet a minimum of 50 million rupees, compared to the minimum requirement of 500 rupees set for large REITs. In addition, SEBI has mandated that officers in charge of Category II and I Alternative Investment Funds (AIFs) should maintain a corpus of at least Rs 500 crore. This extends the regulatory mandate, as previously only Category III AIFs were subject to such requirements.
Support of non-profit organizations
In an effort to strengthen non-profit associations, SEBI has approved a reduction in the minimum issue size for zero coupon zero principal bonds from Rs 1 crore to Rs 50 lakh. This amendment aims to make it easier for non-profit organizations to issue bonds and obtain funds.
Positive impact on the financial market
The regulatory reform proposed by SEBI is seen as a positive step towards enhancing transparency and accountability in the index provider industry. By implementing stricter regulations and increasing supervision, SEBI aims to protect investors and maintain the integrity of the Indian securities market.
SEBI’s recent approval of regulatory framework for index providers marks a significant development in the Indian financial market. This decision, which is expected to increase transparency and regulation in the index provider industry, is crucial to protect the interests of investors. The parallel introduction of a new framework for small and medium-sized REITs will increase flexibility for market participants. Overall, these regulatory changes are set to strengthen the Indian securities market, increasing investor confidence.
Questions to be asked
1. What is the purpose of the regulatory framework recently approved by SEBI?
The new regulatory framework approved by SEBI aims to enhance transparency and control in the index provider industry.
2. Are all index providers required to comply with the new regulations?
No, only index providers that manage significant assets under management are required to comply with the new regulatory framework.
3. How will market participants benefit from the new framework for small and medium-sized REITs?
The new framework for small and medium-sized REITs provides additional flexibility to market participants. It allows them to register as small and mid-sized REITs and choose to voluntarily transfer their current unit ownership.