SEBI Board Meeting Focuses on FPI Settlement Reforms, Governance Changes and Transparency Measures

The Securities and Exchange Board of India is set to hold a key board meeting to evaluate a broad set of proposals aimed at improving market efficiency, governance standards and operational clarity.  

The discussions are expected to cover changes affecting foreign investors, intermediaries and investment structures, along with measures to strengthen transparency. 

FPI Settlement Reforms and Cost Efficiency 

A major proposal under consideration relates to easing the settlement mechanism for Foreign Portfolio Investors in the equity cash market. At present, FPIs are required to follow a gross settlement system, where each purchase transaction must be funded independently, even if offsetting sales occur on the same day. 

The proposed framework introduces the concept of fund netting, allowing investors to adjust purchase obligations against proceeds from same-day sales. This means FPIs would only need to settle the net payable amount instead of funding each leg separately. 

The change is expected to improve operational efficiency and reduce funding pressure, particularly during high-volume events such as index rebalancing. It could also help lower foreign exchange costs that arise due to timing differences between inflows and outflows.  

The proposal comes in response to concerns that the current system increases capital requirements by forcing investors to arrange funds for an additional day. 

Governance Reforms and Procedural Clarity 

The board will also examine revisions to the criteria used to assess the eligibility of market intermediaries. One of the key changes being considered is the removal of the initiation of winding-up proceedings as a disqualification factor.  

Instead, only a final winding-up order would be taken into account, which is expected to bring greater fairness and clarity to the evaluation process. 

Another proposal seeks to formally incorporate the right to a hearing within the rules. Although such opportunities are already provided in practice, explicitly stating this provision is intended to remove any ambiguity and ensure consistency in regulatory procedures. 

This meeting will mark the fifth board session under the leadership of Chairman Tuhin Kanta Pandey, who assumed office on March 1, 2025. 

Transparency Push and Market Development Measures 

In addition to investor and intermediary-related reforms, the board is set to review initiatives aimed at improving ease of doing business in the market.  

These include proposals concerning real estate investment trusts and infrastructure investment trusts, which play a growing role in capital markets. 

Another important agenda item is the discussion of recommendations from a high-level panel focused on conflict of interest and transparency. The panel has suggested a framework centred on enhanced disclosures and a strict approach to handling conflicts involving senior officials. 

Together, these measures reflect a broader effort to strengthen institutional transparency, streamline processes and support a more efficient market ecosystem. 

Read More: SEBI Action in Focus; Bars 18 Entities, Imposes ₹2.8 Crore Penalty in RGRL Case! 

Conclusion 

The upcoming SEBI board meeting brings together multiple reform proposals spanning settlement systems, governance norms and transparency frameworks. The outcomes are expected to shape operational efficiency for investors and reinforce confidence in the overall market structure. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

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