The Securities and Exchange Board of India (SEBI) held its board meeting yesterday, approving a wide-ranging set of regulatory changes covering market intermediaries, foreign investors, alternative funds, and governance norms.
In a recent SEBI board meeting, Tuhin Kanta Pandey outlined key reforms aimed at easing compliance for Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs). AIFs will now be permitted to retain liquidation proceeds beyond their fund life to cover pending tax, litigation, or operational expenses, reducing their compliance burden while maintaining regulatory oversight. FPIs, meanwhile, will be allowed to settle outright cash market transactions on a net basis, enhancing operational efficiency and reducing funding costs, particularly during index rebalancing. These measures are expected to simplify fund management processes and improve the ease of doing business in India’s capital markets.
As it sought to balance ease of doing business with stronger oversight, measures announced include easing compliance for AIFs and REITs/InvITs, revising ‘fit and proper’ criteria, and introducing operational relief for Foreign Portfolio Investors (FPI), among other comments.
The SEBI Board approved an enhanced conflict-of-interest framework for its members and officials based on recommendations of a high-level committee. The overhaul introduces stricter norms around disclosures, trading restrictions, and recusals, along with a digital system to track conflicts and the creation of an Office of Ethics and Compliance.
The framework also brings the Chairman and Whole-Time Members under tighter investment and transparency rules, aligning them more closely with existing employee norms.
SEBI has allowed foreign portfolio investors (FPIs) to settle funds on a net basis for outright cash market transactions. Currently, FPIs follow gross settlement, which increases funding requirements and costs. The new mechanism will reduce fund blockage and is expected to be particularly beneficial during index rebalancing periods, when large buy and sell trades coincide.
The regulator has approved a set of measures to ease operational constraints for REITs and InvITs. These include allowing InvITs to continue holding investments in SPVs even after project completion under certain conditions, expanding investment avenues through lower-risk liquid mutual funds, permitting limited exposure to greenfield projects for privately listed InvITs, and providing greater flexibility in borrowings for highly leveraged structures.
SEBI has revised the ‘fit and proper person’ criteria for intermediaries, clarifying that the mere filing of an FIR or charge sheet will not automatically lead to disqualification. Instead, such cases will be evaluated on a principles-based approach. At the same time, the regulator has tightened norms by expanding disqualification to include convictions for economic offences and ensuring due process through a mandatory opportunity of being heard.
