SEBI Revises Norms for PMS; Also Tightens Loan Default Disclosures for Listed Companies

Moneylife Digital Team 20 November 2019

Investor Interest

Tightening its disclosure norms, market regulator Securities and Exchange Board of India (SEBI) has asked listed companies to report within 24 hours the payment delays beyond 30 days. The market regulator also decided to increase networth and minimum investment requirement for portfolio managers, while revising the timeline for completion of rights basis to 31 days.

Speaking with media after the SEBI board meeting, its chairman Ajay Tyagi says, "Under the proposed SEBI (Portfolio Managers) Regulations, portfolio managers are required to have a networth of Rs5 crore from Rs2 crore, while minimum investment by clients has been increased to Rs50 lakh from Rs25 lakh. Existing portfolio managers are required to meet the enhanced criteria within 36 months."

SEBI says discretionary portfolio managers must invest only in listed securities, money market instruments, units of mutual funds and such other securities or instruments as specified by SEBI from time to time. Non-discretionary or advisory portfolio managers are required to invest not more than 25% of their AUM in unlisted securities.

For all portfolio managers, except those providing only advisory services, it would be mandatory to appoint a custodian. The portfolio managers are also needed to restrict off market transfers from and to clients’ accounts with certain exceptions to facilitate operational convenience.

The market regulator also approved proposals on rights issues for reducing timeline for completion and introducing dematerialisation and trading of rights entitlements (REs) on stock exchanges. Accordingly, the timeline to complete rights issues have been reduced to T+31 days from T+55 days. "Shareholders holding shares in physical form will be required to provide details of demat account for credit of REs. ASBA facility made mandatory for all investors applying to rights issue," SEBI says.

After revising disclosure norms for listed banks earlier this month, the SEBI board decided to revise disclosure norms for listed entities on defaults on payments of interest of repayment of loans.

"In order to address the gaps in availability of information with respect to defaults, the (SEBI) board has, inter-alia, decided that in case of any default in repayment of principal or interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities shall, promptly, but not later than 24 hours from the 30th day, disclose the fact of such default. These provisions shall be applicable from 1 January 2020," the market regulator says.

Earlier this month, SEBI had asked all listed banks to disclose divergences and provisioning beyond specified threshold, as soon as reasonably possible and not later than 24 hours upon receipt of the Reserve Bank of India (RBI)'s final risk assessment report (RAR), instead of waiting to publish them as part of annual financial statements.

SEBI says, banks will have make disclosures in either or both the cases where additional provisioning for non-performing assets (NPAs) assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period, and the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period. (Read: SEBI Asks Banks to Disclose NPA Divergence and Provisioning Within 24 Hours)

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