INSITE - India - Oct 2024
- sukhwinder21
- Nov 5, 2024
- 5 min read
SEBI EXTENDS DEADLINE FOR AGM COMPLIANCE RELAXATION UNTIL SEPTEMBER 30, 2025
Summary: The Securities and Exchange Board of India (SEBI) has extended compliance relaxations for listed companies, allowing Annual General Meetings (AGMs) to be held electronically without sending physical financial statements until September 30, 2025. This circular aligns with the Ministry of Corporate Affairs' (MCA) guidelines, with conditions set in SEBI's 2023 Master Circular and compliance with the Companies Act, 2013.
In Detail: On October 3, 2024, SEBI issued a circular extending the relaxation for listed companies from complying with certain provisions of the SEBI Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) for AGMs and general meetings held through electronic means. These relaxations, initially set to expire on September 30, 2024, have now been extended until September 30, 2025. This extension is in line with the MCA General Circular No. 09/2024, dated September 19, 2024, which permits AGMs to be conducted without the need to send physical copies of financial statements and related documents to shareholders.
SEBI emphasized that listed companies must comply with certain conditions laid out in the Master Circular issued in July 2023 while availing themselves of these relaxations. These conditions ensure that electronic meetings maintain transparency and meet regulatory standards. Additionally, SEBI reiterated that while these relaxations ease certain procedural requirements, the provisions of the Companies Act, 2013, and its related amendments remain applicable, ensuring that companies continue to meet their legal and corporate governance obligations.
The purpose of these extensions is to simplify the procedural burden on companies while adapting to evolving digital communication methods, especially in a post-pandemic landscape, where electronic AGMs have become more common.
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SPECIFIC DUE DILIGENCE OF INVESTORS AND INVESTMENTS OF AIFS
Summary: On October 8, 2024, SEBI required Alternative Investment Funds (AIFs) to conduct due diligence on investors and investments to comply with regulations for Qualified Institutional Buyers (QIBs) and stressed assets. AIFs with significant investors must adhere to specific standards, and custodians are tasked with reporting to SEBI.
In Detail: On October 8, 2024, SEBI issued a circular outlining specific due diligence requirements for AIFs and their managers. This circular, issued under the authority of Regulation 20(20) of the SEBI (AIF) Regulations, 2012, mandates that AIFs must conduct thorough due diligence on both their investors and investments to prevent any circumvention of applicable regulatory frameworks. This includes compliance with provisions concerning QIBs, Qualified Buyers (QBs), and regulations set forth by the Reserve Bank of India (RBI) concerning investments in stressed assets.
One key aspect of the circular is that AIFs where any single investor contributes 50% or more to the total corpus of a scheme must adhere to the implementation standards set by the Standard Setting Forum for AIFs before availing benefits associated with QIB or QB status. This measure aims to ensure that large investors in AIFs are subjected to robust compliance mechanisms to prevent any regulatory arbitrage.
Additionally, the circular emphasizes that AIFs must ensure that their investment structures do not indirectly allow RBI-regulated entities to acquire interests or assets they are otherwise prohibited from holding directly, thus reinforcing regulatory safeguards.
The circular also introduces enhanced due diligence requirements for existing and prospective investments originating from countries sharing land borders with India. These measures are designed to ensure that investments from such jurisdictions are scrutinized for compliance with both Indian securities laws and national security considerations.
Furthermore, SEBI has placed the onus on custodians to compile detailed reports on these investments and submit them to SEBI for monitoring and regulatory oversight. Custodians are responsible for ensuring that the investments are properly documented and comply with the circular’s provisions. This enhanced due diligence framework aims to maintain the integrity of the Indian securities market, protect investor interests, and ensure adherence to the RBI’s guidelines and broader regulatory policies.
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ASSOCIATION OF PERSONS REGULATED BY THE BOARD AND THEIR AGENTS WITH CERTAIN PERSONS
Summary: On October 22, 2024, SEBI issued a circular prohibiting regulated entities, such as stock exchanges, from associating with unregistered investment advisors. Thes exceptions apply for specific digital platforms that meet SEBI criteria. Entities must terminate contracts with unauthorized advisors within three months. This circular aims to protect investors and ensure compliance under the SEBI Act of 1992, with additional guidelines for digital platforms to follow.
In Detail: On October 22, 2024, SEBI published a circular that introduces new regulations regarding associations between regulated entities, such as stock exchanges, clearing corporations, and depositories. According to the amended regulations, these entities and their agents are prohibited from forming associations with individuals who offer investment advice or make claims about the performance of securities unless those individuals are registered with SEBI.
Importantly, the restrictions do not apply to associations made through specified digital platforms that meet SEBI’s criteria for preventive and curative measures. This exception allows for certain digital interactions to continue under regulated conditions. Additionally, the circular mandates that entities terminate any contracts with individuals involved in unauthorized advisory roles within three months of the circular’s release.
The primary aim of this circular is to safeguard investor interests and promote compliance within the securities market. It operates under the authority granted by the SEBI Act of 1992 and related regulations, ensuring that all parties adhere to the established guidelines. Further details regarding the guidelines for the approved digital platforms will be provided separately.
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ANNUAL COMPLIANCE CERTIFICATE FOR CLIENT LEVEL SEGREGATION BY NON-INDIVIDUAL INVESTMENT ADVISERS AND TIMELINE FOR SUBMISSION OF PERIODIC REPORTS
Summary: On October 25, 2024, SEBI released Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/147, updating compliance rules for non-individual Investment Advisers (IAs). Key changes allow non-individual IAs to get annual compliance certificates from any auditor and revise report submission deadlines to a 30-day window after each half-yearly period. These updates aim to enhance compliance efficiency and protect investor interests.
In Detail: On October 25, 2024, SEBI released Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/147, updating compliance requirements for non-individual IAs. The circular introduces two main changes:
Non-individual IAs can now obtain an annual compliance certificate regarding client segregation from any auditor, not just a statutory auditor, allowing for greater flexibility.
The timeline for submitting periodic reports to the Investment Adviser Administration and Supervisory Body (IAASB) has been revised, giving a 30-day window after each half-yearly reporting period for submissions.
These changes are effective immediately and aim to enhance compliance efficiency while protecting investor interests. The IAASB is responsible for informing investment advisers about these updates and making necessary regulatory adjustments.
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