‘SEBI weighs regulatory changes across IPOs, broking, mutual funds’, Pg15

Key Highlights:

• The Securities and Exchange Board of India (SEBI) is evaluating significant regulatory reforms across IPOs, broking, and mutual funds.
• SEBI aims to enhance IPO price discovery through the pre-open call auction mechanism and revise net-worth requirements for stock brokers.
• Compliance norms for research analysts are being eased, and mutual funds' intra-day borrowing rules are being made more practical.
• The government has exempted Foreign Portfolio Investors (FPIs) from long-term and short-term capital gains tax and withholding tax on investments in government securities, effective April 1, 2026.
• Measures are underway to strengthen the corporate bond market, including the introduction of corporate bond indices and a market-making framework.

Detailed Insights:

• SEBI, under Chairman Tuhin Kanta Pandey, is reassessing existing norms for stock brokers to create a more risk-sensitive approach to capital adequacy, ensuring requirements align with operational scale and risks.
• The proposed enhancements to the pre-open call auction mechanism for IPOs and relisted securities aim to facilitate more stable and efficient market openings, reducing volatility for investors.
• Regulatory requirements for research analysts are being rationalized, including easing call recording obligations during institutional interactions, to simplify compliance without compromising transparency.
• A more practical framework for mutual funds' intra-day borrowing will allow it as an efficient tool for managing temporary liquidity mismatches, moving beyond its previous role solely as a contingency measure.
• The recent tax exemptions for FPIs on government securities and the removal of certain corporate debt investment limits are expected to significantly boost capital inflows into the Indian debt market.
• SEBI and the Reserve Bank of India (RBI) are collaborating to introduce derivatives on corporate bond indices, further deepening the debt market.
• The Electronic Book Provider platform has been expanded to include issuances by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), improving transparency and efficiency in the corporate bond market.
• A market-making framework is being developed for the corporate bond market to enhance liquidity, following a budget announcement.

Key Concepts Involved:

• Securities and Exchange Board of India (SEBI): The primary regulator for the securities market in India, protecting investors and promoting market development.
• Initial Public Offering (IPO): The process by which a private company first offers shares to the public, becoming a publicly traded company.
• Foreign Portfolio Investors (FPIs): Overseas entities that invest in the financial assets of a country, such as stocks and bonds, without taking control of the company.
• Pre-open Call Auction Mechanism: A process before regular trading hours to determine the opening price of securities, especially for new listings or relisted shares, based on aggregated demand and supply.