INSITE - India- Dec 2024

POLICY FOR SHARING DATA FOR THE PURPOSE OF RESEARCH/ ANALYSIS

Summary: On December 20, 2024, the Securities and Exchange Board of India (SEBI) introduced a new policy to facilitate academic research while safeguarding data privacy and security. This initiative enables accredited academic institutions to access anonymized market data for research purposes.

In Detail: SEBI has implemented a uniform policy applicable to stock exchanges, clearing corporations, and depositories for sharing data strictly for research purposes or research publications conducted by accredited academic institutions. This policy explicitly excludes data shared with vendors for commercial purposes.

Accordingly, SEBI issued a circular on December 20, 2024, introducing an updated policy for sharing market data for research. The policy allows accredited academic institutions access to anonymized data while ensuring privacy and security. SEBI directed stock exchanges, depositories, and clearing corporations to classify their data under specific guidelines.

Key Highlights of the Policy

1. Data Categorization: SEBI mandates that stock exchanges, depositories, and clearing corporations classify their data into two categories:

   (a) First Basket (Public Data): This basket includes aggregated data such as trading statistics, indices, and bond reports. This data will be made publicly available with certain volume and processing restrictions and a nominal fee may apply for access.

   (b) Second Basket (Restricted Data): This basket includes confidential information like KYC information/trade logs/holding details of an entity/individual, etc. with the identity of the entity/individual and trade logs, which remain non-public to protect privacy.

2. Implementation Timeline: Entities must categorize their data, submit it to SEBI for approval within 60 days, and ensure the first basket data is accessible in a stakeholder-friendly format. Sample files for public datasets must also be made available on their websites.

3. Researcher Access: A “data request form” will be provided to researchers to justify their need for specific datasets.

4. Annual Review: SEBI will review the policy annually to ensure it remains effective and relevant.

This policy strikes a balance between enabling data-driven academic research and maintaining stringent data privacy standards. It also promotes transparency by making aggregated market data more accessible to stakeholders.

Key Links: SEBI | Policy for Sharing Data for the Purpose of Research / Analysis

PRO-RATA AND PARI-PASSU RIGHTS OF INVESTORS OF AIFS

Summary: The Securities and Exchange Board of India (SEBI) has issued a circular providing clarity on pro-rata and pari-passu rights for investors in Alternative Investment Funds (AIFs). The circular mandates that investors' rights must align with their commitments and receive equal treatment, except where differential rights are disclosed and implemented in accordance with prescribed standards.

In Detail: SEBI has issued a circular clarifying pro-rata and pari-passu rights of investors in AIFs following amendments to the SEBI (Alternative Investment Funds) Regulations, 2012. Pro-rata rights ensure that investors' entitlements in investments and distributions correspond to their respective commitments, subject to exceptions such as exclusions, defaults, or shared profits. Pari-passu rights mandate equal treatment of investors, except where differential rights are transparently disclosed and implemented in accordance with the standards prescribed by the Standard Setting Forum for AIFs (SFA).

Managers and sponsors may subscribe to subordinate unit classes under specified conditions to address varying risk profiles, provided such subscriptions do not result in indirect benefits to their obligations. AIFs employing priority distribution models are prohibited from accepting new commitments or investments unless explicitly exempted.

Strict compliance with these directives is required, including documentation and reporting of breaches in investment limits. Managers must rectify any instances where differential rights adversely affect other investors. Special provisions are available for Large Value Funds (LVFs), which may seek exemptions subject to the explicit consent of their investors. Additionally, all eligibility criteria and differential rights must be clearly disclosed in Private Placement Memorandums (PPMs).

Key Links:  SEBI | Pro-rata and pari-passu rights of investors of AIFs