The Securities and Exchange Board of India (Sebi) begins to halt easing measures adopted during the covid-induced lockdown spike as it tries to bring markets back to normal, two knowledgeable officials have said development.
With less restriction in the Unlock 4.0 phase, the market regulator believes it is reasonable to phase out measures adopted to facilitate compliance and reduce volatility.
To put it in perspective, Sebi’s reluctance to expand the new margin standards can be remarkable. Under these standards, a client’s securities would not be considered a margin, and the client would have to commit his securities after authorization with the broker. The standards were expected to come into effect from June 1, but the deadline was extended twice due to the pandemic, first to August 1 and then to September 1. When brokers reached out to Sebi for a third extension, citing incomplete back-end work due to the pandemic, the regulator refused.
“As soon as the new margin framework is established, Sebi will consider removing the emergency measures of improving margins for highly volatile stocks, reducing market-wide position limits for volatile scrips and slowing down short sales, ”said one of the two people quoted. above, requesting anonymity.
Since the pandemic broke in India, the Sebi has issued more than 40 circulars relaxing the rules – Businesses have more time to file quarterly results and hold annual general meetings; brokers and trading members obtained flexibility in keeping records of customer call data; and mutual fund houses have more time to comply, among other things. Sebi also granted a one-time extension of the validity of public tender filings.
“All of these steps were taken with the challenges of covid-19 in mind. But now, when businesses have settled into the new normal and India is no longer strictly on lockdown, Sebi is considering easing these eases gradually. This is to avoid any sudden disruption and also to restore normalcy to the markets, ”said the second person.
Recall that on August 31, Sebi withdrew the document processing eases for foreign portfolio investors (REITs) from the jurisdictions. It also decided to set up system-based information for members of the promoter group, directors and designates of a listed company. This information concerns transactions on shares and derivatives on shares of the company. The idea was first proposed in December 2015 and its implementation now speaks to Sebi’s confidence that the worst of the market disruption is behind.
On September 8, exchanges and custodians said in a joint statement that the new pledge system works and pledges are created transparently. Sebi wants to phase out increased surveillance and regulation measures.
Sebi will be guided by the Ministry of Corporate Affairs (MCA) relaxations for companies on AGMs and deadlines for filing results, the first person added.
MCA, in a recent notification, allowed companies to hold their AGMs for fiscal year 2020 until the end of this year. Most NSE 500 companies have already announced their AGM dates or held AGMs, and the easing would help small businesses.
“As time goes on and businesses settle into operations, some of these one-off relaxations may be phased out and no longer needed. However, some provisions such as the authorization of virtual meetings, etc. can have continued benefits for businesses and Sebi should consider continuing with such options even after covid-19, ”said Madhu Sudan Kankani, insurance partner of Deloitte India.