SEBI Reforms: New Mutual Fund Options, T+0 Settlement, Faster Rights Issue

On Monday, the Securities and Exchange Board of India (SEBI) unveiled a series of progressive reforms designed to enhance the ease of doing business within the Indian stock market. These measures, ranging from reduced disclosure requirements to the introduction of faster rights issue processes and the expansion of the T+0 settlement cycle, are poised to significantly benefit investors.

However, despite anticipation, SEBI made no changes to the index derivatives rules. Market participants had been closely watching this meeting’s outcome for potential updates following a consultation paper released months ago, but no announcements were made on this topic. Read more about it here.

SEBI Board Meeting Outcome: 5 Key Reforms

Investment Strategies: New Investment Opportunities within Mutual Funds

SEBI has innovatively expanded the mutual fund framework by introducing a new asset class named 'Investment Strategies.' This addition bridges the gap between mutual funds and Portfolio Management Services (PMS), aiming to counter the spread of unregistered investment schemes. With a minimum investment requirement of Rs 10 lakh, this product targets investors ready to embrace higher risks for potentially greater returns, offering a regulated and flexible investment avenue.

Simplifying Mutual Fund Access with MF Lite

The introduction of the Mutual Funds Lite (MF Lite) framework marks a significant simplification of the regulatory requirements for launching passively managed mutual fund schemes. By lowering entry barriers such as net worth, track record, and profitability for sponsors, SEBI encourages more entities to offer passive mutual funds. This initiative is expected to broaden the range of available investment products, enabling investors to diversify and optimize their portfolios with greater ease.

Expanding T+0 Settlement for Enhanced Market Liquidity

SEBI is set to increase the number of stocks eligible for the optional T+0 settlement from 25 to the top 500 stocks by market capitalization. This reform is designed to speed up the settlement process, enhance liquidity, and allow investors to respond more swiftly to market changes.

Additionally, an optional block deal window will be available from 8.45 AM to 9.00 AM under the T+0 settlement cycle, in addition to the existing T+1 settlement options, further enhancing trading flexibility and efficiency.

Accelerating Rights Issue Process

Investors looking to participate in a company's growth will benefit from SEBI's streamlined rights issue process, now reduced to just 23 working days from the previous 317 days. This accelerated timeline not only facilitates quicker capital access for companies but also allows investors to engage with growth opportunities much sooner than before.

Broader Insider Trading Regulations

While SEBI has refrained from curbing retail speculation in the futures and options segment, it has broadened the scope of insider trading regulations. This expansion aims to cover more individuals indirectly connected to the securities market, ensuring a more robust framework to prevent insider trading and maintain a fair trading environment.

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