By India Today Business DeskThe Securities and Exchange Board of India (SEBI) has approved several reforms to empower shareholders, besides asking large listed companies to make clear disclosures about significant events on the stock exchanges.
The market regulator has given retail investors more control over the money they invest by ensuring that their funds need not stay with brokers for a long period of time.
Sebi chief Madhabi Puri Buch said the intent of the reforms is to “ensure that the spirit of a law is followed and not just the letter”.
Better corporate governance
The Sebi board is eliminating the current practice of having permanent board members for public listed companies. It said that board seats would come for voting every five years, making shareholder approval mandatory for the director.
The market regulator said any special rights granted to a shareholder of a listed entity need to come up for a periodic shareholder approval. These are likely to improve corporate governance norms.
Meanwhile, Sebi also approved a Rs 330 billion fund to backstop the corporate debt market, which will step in to buy illiquid securities in stressful situations.
Also Read | Adani-Hindenburg rowSC directs Sebi to submit probe report in 2 months, sets up expert panel
Clearer disclosures
Sebi has asked the top 100 market listed companies to be clear on disclosures surrounding significant or material events. It has asked them to confirm or deny market rumours that impact share prices to bring more transparency and ensure timely disclosure of “material events”.
This requirement will start from October 1, 2023 for the top 100 companies in terms of market capitalisation and from April 1, 2024 for the top 250 companies. Sebi said in its press release that material events and disclosures emerging from a board of directors meeting must be disclosed to exchanges within 30 minutes.
Better investor fund protection
To protect retail investors’ funds, the market regulator has announced a system which allows an investor to block funds in their bank accounts rather than transferring them upfront to brokers before executing secondary market trades.
It may be noted that a similar system has been put in place for initial public offerings, aimed at preventing misuse of client funds, brokers’ defaults and the consequent risk to investors’ capital.
Some other changes introduced by Sebi include allowing private equity funds to be the main shareholders in an asset management company which runs a mutual fund.
The market regulator also recommended more disclosures around the environment, social and government (ESG) for companies and mutual funds investing based on those metrics. It has now managed that 65 per cent of assets of ESG focused mutual fund schemes should be in companies that make comprehensive related disclosures.
Also Read | ESG funds in 10 pointsInvestment with a conscience
Keven Bayer
Kayleigh Rogahn
Wilmer Bode