SEBI to Take Decision on 11 Key Proposals: Broker Regulation, Revamp of Mutual Fund Expense and More

The capital market regulator, the Securities and Exchange Board of India (SEBI) is set to review 11 key regulatory proposals at its board meeting on December 17. The agenda is expected to include major updates to broker regulations, a revamp of mutual fund expense frameworks, reforms in exchange administration, and the potential introduction of a closing-auction session as per news reports.

Other items under consideration include simplifying disclosure and lock-in norms under the IPO framework, easing compliance requirements for debt-market issuers, relaxing KYC rules for NRIs, standardising mutual fund folio onboarding processes, allowing incentives to boost retail participation in public debt issues, and enhancing transparency and reporting standards for alternative investment funds.

Closing-Auction Mechanism

The board is likely to revisit the long-discussed closing auction session for equity markets. This mechanism, widely used in global exchanges, enables end-of-day price discovery through an auction, replacing the current Volume Weighted Average Price (VWAP) system. The aim is to reduce volatility during the final trading minutes while providing a more precise benchmark for settlements, index calculations, and fund NAVs.

Although the concept has been debated for years, some domestic institutional investors have raised concerns about implementation costs and the required changes to trading systems. SEBI issued a revised consultation paper in August following an initial draft a year ago.

Exchange Administration

SEBI is expected to streamline rules governing exchanges and clearing corporations, cutting down on redundant filings, standardising circulars, and simplifying procedural approvals. The board may also consider merging investor protection funds across equity and commodity segments into a single pool and introducing a uniform three-year lookback period for claims in broker-default cases.

Broker and Mutual Fund Regulations

Regulations for brokers and mutual funds, some of which date back to the 1990s, are due for a major overhaul. For brokers, SEBI plans to update definitions, reduce compliance burdens, and address gaps related to algorithmic trading, online brokerage models, and fee structures. Mutual fund regulations are also set to be modernised, including revisions to the total expense ratio framework and adjustments to brokerage caps, likely less restrictive than initially proposed.

IPO Norms

Amendments to the Issue of Capital and Disclosure Requirements (ICDR) Regulations are expected to simplify IPO procedures and rationalise lock-in norms, particularly since depositories currently cannot impose lock-ins on pledged shares.

Conflict-of-Interest Recommendations

The board will review a report on managing conflicts of interest, which suggests measures such as public disclosure of assets and liabilities, stricter gift policies, an anonymous whistleblower mechanism, and a two-year cooling-off period for post-retirement appointments.

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