Tue Oct 01 16:36:56 UTC 2024: ## SEBI Eases Trading Regulations, Introduces New Investment Products

**Mumbai, India** – The Securities and Exchange Board of India (SEBI) has announced a series of regulatory changes aimed at simplifying trading practices for individual investors and promoting innovation in the mutual fund industry. The changes, approved during a board meeting on Monday, September 30, include the introduction of a new investment product for high-net-worth individuals, a relaxed framework for passive funds, and faster timelines for rights issues.

**New Asset Class for High-Risk Investors:**

SEBI has authorized asset management companies to offer riskier investment strategies, such as long-short equity, to high-risk investors with a minimum investment of ₹10 lakh. This new category, positioned between traditional mutual funds and portfolio management services, will provide high-net-worth investors with access to equity derivatives. The new product, dubbed “Investment Strategies,” will be subject to safeguards including no leverage, a limit of 25% of assets under management for derivative exposure, and a prohibition on investment in unlisted and unrated instruments.

**MF Lite Framework for Passive Funds:**

SEBI has introduced a relaxed regulatory framework, “MF Lite,” for entities looking to launch passive mutual fund schemes. This framework eases requirements for sponsors, including net worth, track record, and profitability, and simplifies the approval process. The goal is to encourage new players, reduce compliance burdens, and promote market liquidity. Existing asset management companies with both active and passive schemes can choose to hive off their passive schemes to separate group entities under the MF Lite framework.

**Faster Rights Issue Timeline:**

SEBI has streamlined the process for rights issues through the preferential allotment route, reducing the timeline from 317 days to just 23 days. The new process eliminates the requirement to file a draft letter of rights offer with SEBI and instead allows for approval from stock exchanges. Issuers can now complete rights issues without mandatory appointment of a merchant banker. This faster process is expected to make rights issues a more attractive option for corporates seeking capital.

**Expanded Definition of “Connected Person”:**

SEBI has expanded the definition of “connected person” and “immediate relative” under insider trading regulations to facilitate effective investigation and enforcement. The new definition includes spouses, children, parents, and siblings of connected persons. This broader definition aims to address the potential for insider trading through indirect associations with individuals working in the securities market.

**Other Regulatory Changes:**

SEBI has also announced a range of other changes, including:

* Mandating qualified stock brokers to offer investors the option to trade in the secondary market using a UPI block mechanism or a three-in-one trading facility.
* Expanding the number of scrips eligible for optional T+0 settlement from the top 25 to the top 500 in terms of market capitalization.
* Introducing a single filing system for listed entities to file reports and documents with stock exchanges.
* Requiring offshore derivative instruments (ODIs) and segregated portfolios of foreign portfolio investors to be subject to disclosure requirements.

These regulatory changes are expected to have a significant impact on the Indian financial markets, making it easier for investors to participate in the market and encouraging innovation and growth in the mutual fund industry.

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