On August 2, 2019, the Securities and Exchange Board of India ("SEBI") had issued a consultation paper to seek public comments on the recommendations of the working group of industry participants in relation to the SEBI (Portfolio Managers) Regulations, 1993 ("1993 Regulations") since a need was felt to review the 1993 Regulations and improve transparency in the dealings of portfolio managers. Pursuant thereto, on January 16, 2020, SEBI notified the SEBI (Portfolio Managers) Regulations, 2020 ("2020 Regulations"), in supersession of the 1993 Regulations, which have come into effect from January 20, 2020. The key changes introduced by the 2020 Regulations are as follows:

1. Enhanced considerations for Applicants

i. Appointment of compliance officer: An applicant desirous of being registered with SEBI as a portfolio manager ("Applicant") must now ensure that it has appointed a compliance officer who shall be responsible for monitoring the compliances with the SEBI Act, 1992, the rules, regulations, etc. made thereunder and for redressal of investors' grievances. In this regard, the 2020 Regulations have clarified that the role of the compliance officer cannot be assigned to the principal officer or the employee of the portfolio manager.

ii. Qualification criteria of principal officer: Under the 1993 Regulations, the principal officer of the Applicant was either required to have (i) relevant professional qualifications; or (ii) minimum work experience of 10 (ten) years in related activities in the securities market; or (iii) a CFA charter from the CFA Institute. Under the 2020 Regulations, in addition to the above, the principal officer of the Applicant is required to have a minimum work experience of 5 (five) years in related activities in the securities market, of which at least 2 (two) years must be in portfolio management or investment advisory services or in the areas related to fund management. Such principal officer must also have the relevant National Institute of Securities Market certification as may be specified by SEBI from time to time. Existing portfolio managers holding a certificate of registration shall comply with these requirements within 36 (thirty six) months from the 2020 Regulations coming into effect.

iii. Qualification criteria for employee of portfolio manager: In addition to the compliance officer and principal officer, as mentioned above, the Applicant must have at least 1 (one) person in his employment who is a graduate from a university or an institution recognised by the Central or State Government or a foreign university with an experience of at least 2 (two) years in related activities in the securities market. Earlier, an Applicant was required to have in its employment at least 2 (two) persons having minimum 5 (five) years' experience between them in related activities in the securities market. Within 12 (twelve) months from the effectiveness of the 2020 Regulations, existing portfolio managers holding a certificate of registration shall comply with these requirements.

2. Net worth requirement

The 2020 Regulations have enhanced the net worth requirements of portfolio managers from INR 20,000,000 (Indian Rupees Twenty million) which is equivalent to approximately USD 285,000 (United Stated Dollars Two hundred eighty five thousand) to INR 50,000,000 (Indian Rupees Fifty million) which is equivalent to approximately USD 714,000 (United States Dollars Seven hundred fourteen thousand). Existing portfolio managers shall comply with this net worth requirement within 36 (thirty six) months from the date of commencement of the 2020 Regulations.

3. Investment approach

The agreement required to be executed between the portfolio manager and its client must also include the portfolio manager's investment approach. The term 'investment approach' has been defined as a broad outlay of the type of securities and permissible instruments to be invested in by the portfolio manager for the customer, taking into account client specific factors. This investment approach must also form part of the disclosure document required to be provided by the portfolio manager to its client, along with the conflicts of interest related to services offered by group companies or associates of the portfolio manager.

4. Disclosure document

The portfolio manager shall ensure that a copy of the disclosure document is (i) filed with SEBI after the grant of certificate of registration before circulating it to any client; and (ii) made available on its website at all times, as soon as registration is granted. In case of any material change in the disclosure document, including any change in the investment approach, a copy of the disclosure document with such material change must be filed with SEBI within 7 (seven) working days from the date of such change.

5. Duties towards clients

Henceforth, a portfolio manager is:

i. prohibited from charging upfront fees, whether directly or indirectly, to the clients, and must disclose the range of fees charged under various heads in the disclosure document;

ii. in case of new clients or fresh investments by existing clients, prohibited from accepting from clients, funds or securities worth less than INR 5,000,000 (Indian Rupees Five million) which is equivalent to approximately USD 71,400 (United States Dollars Seventy one thousand four hundred);

iii. under an obligation to segregate each client's holding in securities in separate accounts;

iv. prohibited from investing the clients' funds in the portfolio managed or administered by another portfolio manager and cannot invest clients' funds based on the advice of any other entity; v. prohibited from executing off-market transfers in the client's account except:

a. for settlement of the clients' own trades;

b. for providing margin/collateral for clients' own positions;

c. for dealing in unlisted securities in accordance with the 2020 Regulations;

d. with specific consent of the client for each transaction; or

e. for any other reason specified by SEBI from time to time;

vi. required to furnish periodical reports to the client, as agreed in the contract, but not exceeding a period of 3 (three) months containing the requisite details.

By introducing the aforementioned measures, the 2020 Regulations aim to ensure fair and transparent dealings by portfolio managers with respect to their clients which will give an impetus to the latter's confidence in market intermediaries.


In addition to and in accordance with the SEBI (Investment Advisers) Regulations, 2013 ("IA Regulations") SEBI, by its circular dated December 27, 2019, introduced certain guidelines to be complied with by investment advisors ("IAs") while rendering investment advisory services with a view to protect investor interests. A summary of the key measures to be adopted by IAs with effect from January 1, 2020 are set out below:

1. Ban on free trial

As per the IA Regulations, investment advice can only be provided by IAs after completing a client's risk profiling and ensuring suitability of the product to which the advice pertains. However, SEBI has noted that IAs are providing advice on free trial basis without considering risk profile of the client. As a result, IAs are now prohibited from providing free trial for any products/services to prospective clients. Also, IAs shall not accept part payments (where some part of the fee is paid in advance) for any product/service.

2. Proper risk profiling and client consent

Considering the importance of risk profiling based on factors such as the client's income, age, securities market experience etc., SEBI has mandated that IAs shall provide investment advice to clients only after completing the risk profile of the client based on information provided by the client; and obtaining consent of the client on completed risk profile either through registered e-mail or by a physical document.

3. Receipt of fees only through banking channels

IAs can accept fees strictly by account payee crossed cheques / demand draft or by way of direct credit into their bank account. Furthermore, IAs are barred from accepting cash deposits from their clients or through payment gateways as these payment methods do not provide proper audit trail of fees received from the clients.

4. Display of complaints status on website

IAs are required to display the following information on their homepage (without scrolling) of their website/mobile app on a monthly basis, i.e., within 7 (seven) days of end of the previous month:

i. Number of complaints received at the beginning of the month;

ii. Number of complaints received during the month;

iii. Number of complaints resolved during the month;

iv. Number of complaints pending at the end of the month and reasons for such pendency.

The above measures have been introduced by SEBI for further regulating the conduct of IAs with the intent to boost investor confidence as these changes would ensure more transparency in the workings of IAs and their dealings with clients. In furtherance of the said intent, on January 16, 2020, SEBI has issued a consultation paper inter alia proposing recommendations on cap on fees charged by IAs and segregation of clients based on advisory and distribution services provided, as opposed to business segregation which was suggested earlier. SEBI has sought public comments on the said paper by January 30, 2020.


On May 21, 2019, SEBI issued a discussion paper on 'Review of Rights Issue Process'. Through this discussion paper, SEBI made certain propositions with regard to the operational and procedural aspects of the rights issue process as set out in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations") and sought comments from market participants on the same. Pursuant thereto, by a notification dated December 26, 2019, amendments were introduced to the ICDR Regulations. The key changes are as follows:

1. Rights entitlements must be credited to the dematerialised account of the shareholders before the date of opening of the issue. Additionally, specified securities shall be allotted only in dematerialised form. The issuer will have to disclose in the letter of offer and the abridged letter of offer the process of credit of rights entitlements in the dematerialised account and renunciation of the same. No withdrawal of application is permitted after the closing date of the rights issue.

2. An applicant shall participate in a rights issue only through the Application Supported by Blocked Amount facility, which facility shall be provided by the issuer as per SEBI's framework.

3. The issuer of a rights issue shall publish an advertisement in at least 1 (one) English and 1 (one) Hindi national daily newspaper with wide circulation, and 1 (one) regional language daily newspaper with wide circulation, at the place where registered office of the issuer is situated and intimate the stock exchanges for dissemination on their websites, at least 2 (two) days before the date of opening of the issue. Prior to the amendment, issuers were required to make issue-related advertisements at least 3 (three) days before the date of opening of the issue.

4. Payment of balance money in calls, outside the issue period, can be made through electronic banking modes.

Also, SEBI introduced a series of changes on December 11, 2019 and December 6, 2019, whereby for the filing of the draft offer documents under the ICDR Regulations, SEBI has enhanced the issue size to INR 7,500,000,000 (Indian Rupees Seven billion five hundred million) ("Threshold Amount") equivalent to approximately USD 107,000,000 (United States Dollars One hundred seven million) from INR 5,000,000,000 (Indian Rupees Five billion) equivalent to approximately USD 71,000,000 (United States Dollars Seventy one million). The draft offer documents will have to be filed through merchant bankers, with the concerned regional office of SEBI under the jurisdiction in which the registered office of the issuer company is situated. In case of issue size in excess of the Threshold Amount, the offer documents will have to be filed at SEBI's head office, irrespective of the jurisdiction under which the registered office of the company is located.

The circular applies to all draft offer documents for issues which are filed with SEBI on or after the date of issuance of the circular. As a result of the foregoing amendments to the ICDR Regulations, the rights issue process will be more time-efficient and transparent for the subscribers. Further, with respect to filing of draft offer documents, the threshold-based filing requirements will ensure uniformity in the manner in which such filings will be dealt with by the SEBI head office and will facilitate procedural and administrative ease for both issuer companies and SEBI offices.


In a notification dated December 26, 2019, SEBI introduced amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") vis-à-vis the provisions relating to disclosures in the annual report and intimation of record date to stock exchanges.

Regulation 34 of the LODR Regulations enumerates disclosures required to be made by listed entities in its annual report. According to the amendment to the LODR Regulations, the annual report of the top 1,000 (one thousand) listed entities (based on market capitalisation calculated as on March 31 of every financial year), should contain a business responsibility report ("Responsibility Report") describing the initiatives taken by them from an environmental, social and governance perspective in accordance with the format specified by SEBI. Also, listed entities not falling within the list of the top 1,000 (one thousand) listed entities (based on market capitalisation calculated as on March 31 of every financial year) may include the Responsibility Report on voluntary basis. Previously, only the top 500 (five hundred) listed entities as per the market capitalisation calculated as on March 31 of every financial year were mandated to disclose the Responsibility Report.

Further, as per the Regulation 42 of the LODR Regulations, a listed entity is required to give prior intimation to all the stock exchanges of at least 7 (seven) working days (excluding the date of intimation and the record date) about the record date with respect to inter alia declaration of dividend, issue of right or bonus shares, issue of shares for conversion of convertible security, etc. With the amendment to the LODR Regulations, in case of rights issue, listed entities shall henceforth be required to give prior notice to stock exchanges about rights issue at least 3 (three) working days (excluding the date of intimation and the record date).

Thus, with the aim to promote investor protection and transparency, SEBI has enhanced disclosure requirements of listed entities by means of the abovementioned amendments to the LODR Regulations. Further, in tandem with the amendments pertaining to the rights issue process under the ICDR Regulations, the timeline for disclosures to stock exchanges under the LODR Regulations has also been reduced.


Having regard to the increased importance of institutional investors in capital markets and their manifold fiduciary responsibilities towards clients/beneficiaries, commonly known as 'stewardship responsibilities' SEBI had issued certain principles on voting for mutual funds through its circulars dated March 15, 2010 and March 24, 2014, which prescribed detailed mandatory requirements for mutual funds to disclose their voting policies and actual voting on different resolutions of investee companies. This was done with the intention to improve corporate governance in investee companies in a bid to protect the interests of investors.

Subsequently, SEBI along with Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority examined a proposal for introducing stewardship principles in India, which was approved by a sub-committee of the Financial Stability and Development Council. As a result, by means of its circular dated December 24, 2019, SEBI has decided that all mutual funds and all categories of alternative investment funds ("AIFs") (hereinafter collectively referred to as "institutional investors") which are registered under the SEBI (Mutual Funds) Regulations, 1996 ("MF Regulations") and SEBI (Alternative Investment Fund) Regulations, 2013 ("AIF Regulations") respectively, shall mandatorily follow the stewardship code as set out in Annex A to the circular in relation to the investment in listed equities ("Stewardship Code").

The Stewardship Code, which shall come into effect from April 1, 2020, enshrines the following 6 (six) stewardship principles which are to form part of the Comprehensive Policy (as defined hereinafter):

1. Discharge and disclosure of stewardship responsibilities

As stewardship responsibilities inter alia include monitoring and actively engaging with investee companies on various matters including operational/ financial performance, strategy, corporate governance (including board structure, remuneration, etc.), material environmental, social, and governance ("ESG") opportunities or risks and capital structure, the Stewardship Code mandates that every institutional investor shall formulate a comprehensive policy on how it intends to fulfil the aforesaid responsibilities and disclose the same publicly ("Comprehensive Policy"). In case any of the activities are outsourced, the Comprehensive Policy must also provide for a mechanism to ensure that the outsourced stewardship responsibilities are being exercised properly and diligently.

The Comprehensive Policy should be reviewed and updated periodically and the updated policy should be disclosed on the entity's website. Institutional investors may also, as part of the Comprehensive Policy, include a training policy for the personnel involved for implementing the principles contained under the Stewardship Code.

2. Management and disclosure of conflicts of interest

As part of the Comprehensive Policy, institutional investors must formulate a detailed policy for identifying and managing conflicts of interest so as to ensure that the interest of the client/beneficiary is placed before the interest of the entity. The policy on management of conflict should be subject to periodical reviews and the updation of same should be publicly disclosed, and should inter alia address the manner of handling matters in which the interests of clients or beneficiaries diverge from each other and also address the following aspects:

i. identification of possible situations where conflict of interest may arise, for instance, in cases where the investee companies are associates of the institutional investor;

ii. implementation of procedures to manage conflicts of interest when they arise which may, among others, include blanket bans on investments in certain cases; having a 'Conflict of Interest' Committee to which such matters may be referred to; clear segregation of voting function and client relations/sales functions; policy for persons to recuse from decision making in case of any actual/potential conflict of interest in the particular transaction; maintenance of records of minutes of decisions taken to address such conflicts.

3. Monitoring of investee companies

Institutional investors should also have a policy on continuous monitoring of their investee companies in respect of all aspects they consider important which shall include performance of the companies, corporate governance, strategy, risks, etc. and covers the –

i. adoption of different levels of monitoring in different investee companies depending on the assets under management. In this regard, liberty has been given to institutional investors to specifically identify situations where they do not wish to be actively involved in the investee companies, for instance, in case of small investments;

ii. monitoring of areas which shall inter alia include company strategy and performance - operational, financial etc.; industry-level monitoring and possible impact on the investee companies; quality of company management, board, leadership etc.; corporate governance including remuneration, structure of the board (including board diversity, independent directors etc.) related party transactions, etc.; risks including ESG risks; shareholder rights and grievances etc.; and

iii. identification of situations, which may trigger communication of insider information and the procedures adopted to ensure that provisions of the SEBI (Prohibition of Insider Trading Regulations), 2015 are complied with.

4. Policy for intervention in investee companies

i. Institutional investors should have a clear policy for identifying circumstances which prompt active intervention in the investee companies ("Intervention Policy"), for instance, poor financial performance of the company, corporate governance related practices, remuneration, strategy, ESG risks, leadership issues, litigation etc. It has been clarified that intervention should be considered, if the circumstances so demand, even when a passive investment policy is followed by the institutional investors or if the volume of investment is low.

ii. The Intervention Policy may specify the manner of intervention, including various levels of escalated intervention, which may include meetings or discussions with the management for constructive resolution of the issue and, in case of escalation thereof, meetings with the boards, collaboration/ interaction with other institutional investors (such as Association of Mutual Funds of India), voting against decisions, etc. Further, a committee may also be formed to consider which mechanism is to be opted, escalation of matters, etc. in specific cases.

iii. Additionally, the Intervention Policy should involve regular assessment of the outcomes of such intervention in investee companies by institutional investors.

5. Voting policy and related disclosures

Since the voting activities of institutional investors in investee companies have a direct impact on client/beneficiary wealth and governance of such companies, the Stewardship Code emphasises the importance of institutional investors taking their own voting decisions after in-depth analyses rather than supporting the management's decisions without proper analysis. Thus, institutional investors must have a comprehensive voting policy in place ("Voting Policy") which is publicly disclosed and shall include inter alia the following:

i. mechanisms to be used for voting such as e-voting, physical attendance in meetings, voting through proxy, etc.;

ii. internal mechanisms for voting including guidelines on (i) assessment of proposals and decisions taken thereon; (ii) manner of voting on certain specific matters/circumstances, including list of possible matters/circumstances, and factors to be considered for a decision to vote for/against/abstain; formulation of oversight committee as an escalation mechanism in certain cases; use of proxy advisors; policy for conflict of interest issues in the context of voting;

iii. disclosure of voting including frequency of disclosure, details of voting results for every proposed resolution in investee companies, rationale for the same and manner of disclosure, for instance, in annual reports to investors or quarterly basis on its website, etc.; and

iv. in case of use of proxy voting or any other voting advisory servers, disclosure on scope of such servers, details of service providers, and extent to which the investors rely upon/ use recommendations made by such service providers.

6. Periodic reporting

Institutional investors will have to periodically report to their clients/beneficiaries on how they have fulfilled their stewardship responsibilities as per their policies in an easy-to-understand format in the by placing a report on their websites on implementation of every principle and the report may be shared with the clients / beneficiaries as part of annual intimation. In this regard, it has been provided that different principles may also be disclosed with different periodicities, for instance, voting may be disclosed on quarterly basis while implementation of conflict of interest policy may be disclosed on an annual basis. Further, any updation of policy may be disclosed as and when done.

It has been clarified that compliance with this principle does not constitute an invitation to manage the affairs of a company or preclude a decision of the institutional investor to sell a holding when it is in the best interest of clients/beneficiaries.

With institutional investors being vested with the task of formulating and disclosing a Comprehensive Policy on identified principles, the Stewardship Code aims to enhance the responsibilities shouldered by them. This recording of the fiduciary duties of institutional investors vis-à-vis their clients/beneficiaries and investee companies will ensure that investors are held accountable for any deviations which will ultimately boost client/beneficiary confidence and improve the governance of investee companies.


Under Regulation 14(6) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 ("InvIT Regulations"), SEBI is empowered to issue guidelines or circulars, as it deems fit, to specify requirements pertaining to the issue and allotment of units by infrastructure investment trusts ("InvITs") whether by way of public issue or private placements. Pursuant thereto, on May 11, 2016, SEBI had issued comprehensive guidelines for the public issue of units of InvITs ("2016 Guidelines"). Now, with the intention to bring the regulatory framework applicable to InvITs which are issuing units on a private placement basis that are proposed to be listed at par with the public issue of units of InvITs, SEBI has issued certain guidelines by its circular dated December 24, 2019 ("InvIT Circular").

The InvIT Circular, which shall come into effect from January 15, 2020, has issued certain clarifications to the InvITs which are issuing units on private placement basis that are proposed to be listed. These include:

1. Filing of draft placement memorandum ("Draft PM")

InvITs, wherein units are issued by way of private placement and which are proposed to be listed, shall file a Draft PM with SEBI and stock exchange(s) through a merchant banker registered with SEBI at least 30 (thirty) days prior to the opening of the issue.

2. Disclosure requirements

The Draft PM must contain the disclosure as specified in Schedule III of the InvIT Regulations and the merchant banker shall submit a due diligence certificate in the prescribed format. In this regard, it is to be noted that the said Schedule III enumerates mandatory disclosures required to be made in the offer document and placement memorandum in accordance with Regulation 15 of the InvIT Regulations.

3. SEBI feedback

SEBI may issue observations, if any, on the Draft PM within 15 (fifteen) working days from the following dates, whichever is later, –

i. the date of receipt of the Draft PM by the Board; or

ii. the date of receipt of satisfactory reply from the issuer and/or merchant banker to the issuer, where SEBI has sought any clarification or additional information from them; or

iii. the date of receipt of clarification or information from any regulator or agency, where SEBI has sought any clarification or additional information from them; or

iv. the date of receipt of a copy of in-principle approval letter issued by the stock exchange(s).

4. Additional duties of merchant bankers

The merchant banker to the issue shall ensure that all the comments received from SEBI are suitably incorporated in the Draft PM prior to filing the placement memorandum in accordance with Regulation 14(2)(e) of the InvIT Regulations, which provides that the placement memorandum must be filed with SEBI along with the requisite fees at least 5 (five) days prior to the opening of the issue and that such opening of issue cannot be at a date later than 3 (three) months from the receipt of the in-principle approval for listing from the stock exchange(s). Further, the merchant banker will have to provide another due diligence certificate in the manner as prescribed under Form B of Annexure I to the 2016 Guidelines.

Thus, SEBI's intention to govern the issue of units by InvITs on a private placement basis that are proposed to be listed on the same level playing field as public issue of units by InvITs is fortified in the InvIT Circular. This will ensure timely disclosure of crucial information to allotees and give an impetus to investor confidence in the distressed Indian infrastructure sector and may possibly encourage investments therein.


As per the LODR Regulations, every listed company is required to submit a statement of deviation or variation ("Statement") to stock exchange(s), on a quarterly basis, in the use of proceeds raised from the public issue, rights issue, preferential issue, qualified institutions placement ("QIP"), etc., as against the objects stated in the offer document or explanatory statement to the notice for the general meeting, as applicable. However, there was no format prescribed for the same. On December 24, 2019, SEBI issued a circular prescribing a format for the Statement in relation to the use of proceeds raised from the public issue, rights issue, preferential issue, QIPs as required under the LODR Regulations. This disclosure shall be made on a quarterly basis (i.e. within 45 (forty five) days of end of each quarter or 60 (sixty) days from the end of the last quarter of the financial year) along with the declaration of the financial results. The first disclosure must be made by listed entities for the quarter ending December 31, 2019. This disclosure shall continue until funds so raised have been fully utilised for the purpose for which they have been raised. The information to be disclosed in the Statement includes name of the entity, mode of fund raising, amount raised, etc.

The circular mandates that the Statement shall be placed before the audit committee of the listed entity for their review on a quarterly basis and the comments of the audit committee along with the report shall be submitted to the stock exchange. Where a listed company is not required to have an audit committee, the report shall be placed before the board of directors of such company.

With the introduction of a prescribed format for submission of the Statement as required under the LODR Regulations, the paucity felt in relation to the uniformity of disclosures has now been remedied by SEBI.


Earlier, under the MF Regulations, asset management companies ("AMCs") were allowed to provide management and advisory services only to category-I foreign portfolio investors ("FPIs") registered under SEBI (Foreign Portfolio Investors) Regulations, 2014 ("FPI Regulations, 2014"). However, in light of the implementation of the SEBI (Foreign Portfolio Investors) Regulations, 2019 in supersession of the FPI Regulations, 2014, the SEBI (Mutual Funds) (Second Amendment) Regulations, 2019 came into force on October 15, 2019 which revised the restrictions on the business activities of AMCs under the MF Regulations. The said amendment provided that AMCs could provide management and advisory services to only such categories of FPIs and subject to such conditions as SEBI may specify from time to time. Thus, by its circular dated December 16, 2019, SEBI has now specified the categories of FPIs to whom AMCs can provide the aforesaid services. They are as follows:

1. government or government related investors such as central banks, sovereign wealth funds, international or multilateral organisations or agencies including the entities that are controlled or are at least 75% (seventy five percent), directly or indirectly, held by such Government or Government related investors;

2. entities which are appropriately and adequately regulated such as pension funds, insurance or reinsurance entities, banks and mutual funds; and

3. FPIs which are appropriately regulated and wherein entities mentioned under paragraphs 1 and 2 above, hold more than 50% (fifty percent) of the shares or units.

The circular has clarified that AMCs which have entered into agreements on or before December 16, 2019 to provide management and advisory services to FPIs which are not covered under the abovementioned categories, may continue to provide the services for the term as mentioned in their respective agreements or for a term of 1 (one) year, whichever is less.

Additionally, the obligation on AMCs to appoint separate fund manager for each separate fund managed by it in accordance with the MF Regulations shall not be applicable to the abovementioned categories of FPIs.

Thus, SEBI has increased the pool of FPIs to which AMCs can provide management and advisory services The same is not limited to category-I of FPIs but all FPIs which have controlling stake held by government and government related investors such as central banks, governmental agencies, sovereign wealth funds and international or multilateral organizations or agencies, pension funds and insurance and reinsurance entities.


On October 10, 2019, SEBI had issued a framework for issuance of depository receipts ("DRs") by listed companies whereunder they were permitted to issue permissible securities or transfer permissible securities of existing holders, for the purpose of issuing DRs, only in permissible jurisdictions. In this context, permissible securities mean equity shares and debt securities, which are in dematerialised form and rank pari passu with the securities issued and listed on a recognised stock exchange. In furtherance of the circular issued in October 2019, SEBI, by its circular dated November 28, 2019 has released a list of permissible jurisdictions and international exchanges, where DRs can be issued and traded, which are, Nasdaq & NYSE (United States of America), Tokyo Stock Exchange (Japan), Korea Exchange Inc (South Korea), London Stock Exchange (United Kingdom), Euronext Paris (France), Frankfurt Stock Exchange (Germany), Toronto Stock Exchange (Canada), and Financial Services Centre in India - India International Exchange and NSE International Exchange.

Opening the gates for issuing DRs in the global market will enable long term investment products to be made available to investors across the world, giving an impetus to the Indian permissible securities underlying the DRs.


Until November 27, 2019, SEBI had only issued guidelines for the preferential issue of units to institutional investors by InvITs registered and listed in accordance with SEBI (InvIT) Regulations, 2014 by means of its circular dated June 5, 2018. With the intent to (i) place real estate investment trusts ("REITs"), registered and listed under the SEBI (REIT) Regulations, 2014 on the same footing as listed InvITs and (ii) establish a comprehensive mechanism to govern the preferential issue of units and institutional placement of units by both listed REITs and InvITs, SEBI, in supersession of the 2018 circular, issued 2 (two) circulars on November 27, 2019 which set out the guidelines applicable to the preferential issue/ institutional placement of units by listed REITs and InvITs (hereinafter collectively referred to as the "Investment Trusts") respectively (the "Guidelines").

1. So far as the conditions of issuance of units by the Investment Trusts are concerned, the Guidelines contain stipulations which inter alia provide that Investment Trusts may make a preferential issue or an institutional placement of units only if:

i. a resolution of the existing unit holders approving the issue of units is accordance with the SEBI (REIT) Regulations, 2014 and SEBI (InvIT) Regulations, 2014, ("Regulations"), as the case may be, has been passed;

ii. units of the same class, which are proposed to be allotted, have been listed on a stock exchange for a minimum period of 6 (six) months prior to the date of issuance of notice to unit holders for convening the meeting to pass the resolution, as mentioned above. For the issuance of units through institutional placement, the minimum listing period is 12 (twelve) months;

iii. the Investment Trusts have obtained an in-principle approval of the stock exchange(s) for listing of the units proposed to be issued under the Guidelines and are in compliance with all the conditions for continuous listing and disclosure obligations under the Regulations and circulars issued thereunder; and

iv. none of the promoters, partners, directors of the sponsor(s), manager or trustee of the Investment Trusts is a fugitive economic offender so declared under the Fugitive Economic Offenders Act, 2018.

2. As for the manner of issuance of units by the Investment Trusts, the Guidelines provide that:

i. the units shall be allotted only in dematerialised form and shall be listed on the stock exchange(s) where the units of the Investment Trusts are listed;

ii. any offer or allotment through private placement shall not be made to more than 200 (two hundred) investors, excluding institutional investors, in any given financial year;

iii. any issuance of units (other than the issuance proposed for consideration other than cash) shall be against full consideration for the units paid by the prospective allottees prior to the allotment through banking channels. Proceeds from such issuance must be kept by the trustee in a separate bank account in the name of the Investment Trust and shall only be utilised for adjustment against allotment of units or refund of money to the applicants till the time such units are listed;

iv. the minimum allotment and trading lot for the units issued must be equivalent to the minimum allotment and trading lot as applicable to the units of the same class, under the extant Regulations or circulars issued thereunder;

v. upon allotment of units, in addition to filing an allotment report with SEBI within 7 (seven) days from the date of allotment of units, providing details of the allottees and the allotment made along with filing the placement document, if applicable, the Investment Trusts will also be required to make an application for listing of units to the stock exchange(s) and the allotted units must be listed within 7 (seven) days from the date of allotment. Failure to comply with this provision will require the Investment Trusts to refund the monies received from the prospective allottees though verifiable means within 20 (twenty) days from the date of allotment. Non-compliance with the said refund mechanism will make the Investment Trust, the manager and its director or partner who is an officer in default jointly and severally liable to repay that money with interest at the rate of 15% (fifteen percent) per annum.

3. In addition to the foregoing, the Guidelines also set out (i) the manner of preferential issue and institutional placement of units by the Investment Trusts, including pricing and lock-in; and (ii) disclosures to be made by the Investment Trusts.

4. Further, the Investment Trusts are prohibited from making any subsequent institutional placement until the expiry of 6 (six) months from the date of the prior institutional placement made pursuant to 1 (one) or more special resolutions.

With the issuance of the Guidelines, SEBI has laid down an all-encompassing framework for the governance of preferential issue or institutional placement of units by the Investment Trusts. Since the Guidelines inter alia mandate strict compliance with timelines for listing of units and public disclosures, the Investment Trusts will be bound to carry out the issue, allotment and listing process in a transparent and time-effective manner, furthering investor protection and prompt dissemination of material information.


The Reserve Bank of India ("RBI"), vide a notification dated December 24, 2019, introduced a new category of semi-closed prepaid payment instrument ("New PPIs") with a transaction limit of INR 10,000 (Indian Rupees Ten thousand) equivalent to approximately USD 142 (United States Dollars One hundred forty two) for purchase of goods and services. The following are the salient features of the New PPIs:

1. The loading and reloading of amount in the New PPIs can only be carried out from a bank account. However, these New PPIs can be issued by bank and non-bank PPI issuers subject to essential minimum details obtained from the PPI holder.

2. The amount loaded in New PPIs during any month shall not exceed INR 10,000 (Indian Rupees Ten thousand) equivalent to approximately USD 142 (United States Dollars One hundred forty two) and the total amount loaded during the financial year shall not exceed INR 120,000 (Indian Rupees One hundred twenty thousand) equivalent to approximately USD 1,700 (United States Dollars One thousand seven hundred). However, the amount outstanding at any point of time in New PPIs shall not exceed INR 10,000 (Indian Rupees Ten thousand) equivalent to approximately USD 142 (United States Dollars One hundred forty two).

3. PPI holders will have an option to close the PPI at any time and to transfer the funds 'back to source' at the time of closure.

RBI's intention to release the New PPIs was conveyed in the monetary policy review in early December, 2019 in order to give impetus to small value digital transaction. The master direction on issuance and operation of PPIs has also been amended accordingly.


On December 23, 2019, RBI increased the aggregate permissible exposure of a lender to all borrowers at any point of time, across all peer to peer ("P2P") platforms, from INR 1,000,000 (Indian Rupees One million) equivalent to approximately USD 14,000 (United States Dollars Fourteen thousand) to INR 5,000,000 (Indian Rupees Five million) equivalent to approximately USD 71,000 (United States Dollars Seventy one thousand), provided that such investments of the lenders on P2P platforms are consistent with their net-worth.

A lender investing more than INR 1,000,000 (Indian Rupees One million) equivalent to approximately USD 14,000 (United States Dollars Fourteen thousand) across P2P platforms must produce a certificate to P2P platforms from a practicing chartered accountant certifying its minimum net-worth of INR 5,000,000 (Indian Rupees Five million) equivalent to approximately USD 71,000 (United States Dollars Seventy one thousand). In addition to the above, every lender must submit a declaration to P2P platforms that they have understood all the risks associated with lending transactions and that P2P platform does not assure return of principal/payment of interest. In order to provide more flexibility in operations, the mandatory maintenance of the escrow account with the bank which has promoted the trustee has been done away with.

The surge in the cap of the aggregate lending limit will assist in the expansion of the P2P lending platform businesses. Additionally, the interests of the consumers are also guarded by making it mandatory for all lenders to provide a declaration for the risks associated with such business. The master direction on NBFC– P2P lending platform has also been amended accordingly.


In light of the amendments made in the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, RBI had, by a circular dated June 28, 2019, allowed asset reconstruction companies ("ARCs") to acquire financial assets from other ARCs with a view to escalate timely resolution of stressed assets (earlier summarised in our newsletter July 2019 #6 (Vol. 3)).

RBI has, by its notification dated December 6, 2019 barred ARCs from acquiring financial assets on bilateral basis, irrespective of the consideration, from (i) a bank/ financial institution which is the sponsor of the ARC; (ii) a bank/ financial institution which is either a lender to the ARC or a subscriber to the fund, if any, raised by the ARC for its operations; or (iii) an entity in the group to which the ARC belongs. However, the ARCs are permitted to participate in auctions of such financial assets, provided the auction is conducted in a transparent manner, on arm's length basis and the prices are determined by market forces.

This move is clearly to avoid conflicts of interest and ensure that acquisition of stressed assets is done on an arms' length basis and that there are no preferences or biases involved amongst group entities, including an ARC which may have a lender as its sponsor or a subscriber to the fund raised by an ARC.


By a notification dated January 3, 2020, the Ministry of Corporate Affairs has amended the Companies (Appointment and Remuneration of Key Managerial Personnel) Rules, 2014 ("A&R Rules") read along with Section 203 of the Companies Act, 2013 ("Companies Act"). With effect from April 1, 2020, every private company which has a paid-up share capital of INR 100,000,000 (Indian Rupees One hundred million) or more, equivalent to approximately USD 1,400,000 (United States Dollars One million four hundred thousand), is required to have a whole-time company secretary. Prior to such change, private companies with paid-up capital of INR 50,000,000 (Indian Rupees fifty million) or more, equivalent to approximately USD 710,000 (United States Dollars Seven hundred ten thousand) were required to have a whole-time company secretary.

Additionally, every company which has outstanding loans or borrowings from banks and public financial institutions of INR 1,000,000,000 (Indian Rupees One billion) or more, equivalent to approximately USD 14,000,000 (United States Dollars Fourteen million), shall be required to submit a secretarial audit report along with the Board's report, in accordance with Section 204(1) of Companies Act.

The amendments to A&R Rules provide for relaxation to private companies from the obligation of appointing a whole-time company secretary as the threshold for appointing the same has now been increased. However, companies with high borrowings from banks and public financial institutions will now require secretarial audit.


In order to attract the customers to buy insurance policies, the Insurance Regulatory and Development Authority of India ("IRDAI"), on December 3, 2019 issued the IRDAI (Third Party Administrators - Health Services) (Amendment) Regulations, 2019 ("TPA Regulations 2019") and permitted policyholders to choose a Third Party Administrators ("TPAs") of their choice, from amongst the TPAs engaged by the insurer, while buying or renewing a health insurance coverage.

A TPA is a middle person engaged by a health insurance company to assist in settling a health insurance claim by using various hospital bills and documents. However, TPAs are not responsible for the rejection or acceptance of claims. The key takeaways of the TPA Regulations 2019 are as follows:

1. If the services of a TPA are terminated during the subsistence of the health coverage, the policyholders shall be permitted to opt for an alternate TPA. The policyholder cannot seek dispensing of the services of the TPA and request the insurer to undertake rendering the health service directly.

2. If the policyholder fails to engage a TPA from the list provided by the insurer, the insurer shall have the right to allot the TPA of its choice. However, no option shall be provided to the policyholders if the insurer engages the services of only 1 (one) TPA.

3. The fees for application for certificate of registration as a TPA has been escalated to INR 100,000 (Indian Rupees One hundred thousand) equivalent to approximately USD 1,400 (United States Dollars One thousand four hundred) from erstwhile INR 20,000 (Indian Rupees Twenty thousand) equivalent to approximately USD 285 (United States Dollars Two hundred eighty five) and the fees for renewal of registration has been escalated to INR 150,000 (Indian Rupees One hundred fifty thousand) equivalent to approximately USD 2,100 (United States Dollars Two thousand one hundred) from INR 15,000 (Indian Rupees Fifteen thousand) equivalent to approximately USD 210 (United States Dollars Two hundred ten). The applicant will now be required to demonstrate preparedness in relation to adequate technological capabilities, data security and human resources. Further, at all times during the period of registration, a TPA will be required to maintain its net worth at INR 10,000,000 (Indian Rupees Ten million) equivalent to approximately USD 140,000 (United States Dollars One hundred forty thousand).

4. The promoters of the applicant must have professional competence and reputation of fairness and integrity to the satisfaction of the IRDAI. In addition, the promoters of the applicant must (i) be carrying on business not related to insurance for a period of at least 3 (three) years before the date of application; (ii) have positive net worth in all the immediately preceding 3 (three) financial years before the date of application; and (iii) have net worth of not less than the respective capital contribution in the immediately preceding 2 (two) financial years before the date of application.

5. In case where applicant has more than 1 (one) investor, an investor with more than 10% (ten percent) shareholding in the applicant shall be considered as a promoter and the promoters shall be subject to a lock-in period of 3 (three) years, from the date of receiving certificate of registration, for the proposed funds to be invested in the applicant. In addition to the promoters, Indian investors together shall not hold more than 25% (twenty five percent) of paid up equity capital of the applicant.

6. A TPA is required to commence business within a period of 12 (twelve) months from the date of certificate of registration and an additional period of 6 (six) months maybe provided by IRDAI on an application by the applicant. However, if the TPA fails to commence business withing the stipulated time, IRDAI shall have the right to cancel the registration. Additionally, as TPA against whom an order of revocation/ cancellation/ denial of renewal of registration has been issued by IRDAI cannot submit a fresh application for a period of 2 (two) years from the date of such revocation/ cancellation/ denial of renewal of registration.

Allowing the policyholders to choose the TPA of their choice will provide them the flexibility and comfort to rely on the person of their choice while raising claims in relation to health insurance. Also, with strict norms on credentials of an applicant to be appointed as TPA, it will make the TPA more accountable.


The Competition Commission of India ("CCI") is proposing to further amend the CCI (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 ("Combination Regulations") and consequently, issued the draft CCI (Procedure in regard to the transaction of business relating to combinations) Third Amendment Regulations, 2019 ("Draft Amendment") for stakeholder to comment until December 15, 2019.

Under the Combination Regulations, without the prior approval of CCI, no combination exceeding the jurisdictional thresholds can be consummated. However, as per the Draft Amendment any proposed combination involving acquisition of shares pursuant to a public bid or in a stock exchange may be concluded without prior CCI approval provided: (a) without delay, the acquirer gives notice of such transaction to CCI as required under Regulation 5 or Regulation 5A of the Combination Regulations; and (b) the acquirer does not exercise any right attached to the shares and/or influence the target enterprise, in any manner whatsoever, unless CCI's approval is received. The Draft Amendment has clarified that such market purchase transactions will not be considered effective without CCI approval.

The proposed amendment is a welcome change since it is difficult to apply for CCI's approval and require the target company to co-operate in providing relevant information for making the application, unless it is a transaction which is approved by the target company and / or its promoters, which may not necessarily be the case if the acquisition envisaged is of shares of listed companies in the open market. Such change, if brought into force, will promote ease of doing business and not have any adverse effects on the target since the acquirer will not be able to exercise any right in relation to the shares unless CCI's approval is received.


The precedent laid down in National Aluminium Company Ltd. v. Pressteel & Fabrications (P) Ltd. and Anr. ((2004) 1 SCC 540) after analysing the wordings of Section 36 (enforcement of arbitral award) of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") was that as soon as an application challenging an arbitral award was made under Section 34 of the Arbitration Act, the imposition of automatic stay on the enforcement of the arbitral award as if it were a decree of a court was implicit. However, this position of law defeated the underlying objective of the alternate dispute resolution system (i.e., speedy disposal of disputes with minimum intervention of the courts), and hence, the Supreme Court of India urged the Central Government to amend Section 36 of the Arbitration Act.

Subsequently, with the amendment to the Arbitration Act on October 23, 2015 ("2015 Amendment"), Section 36 of the Arbitration Act was modified and the practice of granting automatic stay to parties upon filing of a petition under Section 34 was abolished. Post the 2015 Amendment, a stay on the enforcement of the arbitral award would only be granted upon a separate application being filed and deemed by the Court to merit a stay to be granted. While amending Section 36 of the Arbitration Act proved to be a pragmatic step, the introduction of Section 26 (Arbitration Act not to apply to pending arbitral proceedings) in the 2015 Amendment generated confusion in relation to its retrospective or prospective applicability.

To rectify this uncertainty, Section 87 (effect of arbitral and related court proceedings commenced prior to 23rd October, 2015) was inserted through the Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Amendment Act") which clarified that the 2015 Amendment shall neither apply to the arbitral proceedings that have commenced prior to the introduction of such 2015 Amendment nor to the court proceedings arising out of or in relation to such arbitral proceedings, irrespective of whether such court proceedings have commenced prior to or after the 2015 Amendments, unless parties agree otherwise. It also clarified that the 2015 Amendment will only apply to arbitral proceedings that have commenced on or after the introduction of 2015 Amendment and to court proceedings arising out of or in relation to such arbitral proceedings. Additionally, Section 15 of the 2019 Amendment Act deleted Section 26 of the 2015 Amendment.

With the insertion of Section 87 and the deletion of Section 26 of the 2015 Amendment, the 2019 Amendment Act contradicted the decision of the division bench of the Supreme Court consisting of Justice Rohinton Fali Nariman and Justice Navin Sinha in BCCI v Kochi Cricket Private Ltd. ((2018) 6 SCC 287) ("BCCI Judgment") wherein the apex court held that, as a general rule, the 2015 Amendment is intended to have prospective effect and would apply to arbitration proceedings as well to all court proceedings commencing on or after October 23, 2015. However, the Supreme Court carved out an exception to the aforementioned and stated that the 2015 Amendment would apply retrospectively to applications filed under Section 36 of the Arbitration Act since enforcement proceedings are entirely procedural in nature and did not create substantive rights in the parties seeking such enforcement.

Thus, in order to bring harmony and to eliminate the ambiguities pertaining to the applicability of the 2015 Amendment, on November 4, 2019, the Supreme Court in the case of Hindustan Construction Company Ltd v Union of India & Ors. ((Writ Petition (Civil) No. 1074 of 2019) ("HCC Judgement") applied the doctrine of "manifest arbitrariness" in terms of Article 14 of the Constitution of India, 1950 and struck down the insertion of Section 87 as well as the deletion of Section 26 of the 2015 Amendment. It was also held that the BBCI Judgment will continue to apply so as to make the 2015 Amendment applicable to all court proceedings initiated after October 23, 2015.

While the insertion of Section 87 clarified the prospective applicability of the 2015 Amendment, it also adversely impacted companies which lost out due to the automatic stay granted by virtue of Section 36 of the Arbitration Act. Now, with the delivery of HCC Judgement, the ambiguity in dispute resolution process has been clarified.

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