Edition August, 2024

Dear Professionals,
Edition - August, 2024
We are delighted to introduce our Compliance Newsletter, keeping you
updated with all the major developments in the compliance arena. We
aim to keep you informed with the regulatory reforms and emerging
market scenario.

In this issue, we intend to keep you up-to-date of regulatory updates MCA Updates
made during the month of August, 2024 in the Corporate Law regime.
RBI Updates
We will be happy to have your feedback. If you have any comments,
suggestions or queries, please feel free to get in touch at Securities Law Updates
sandeeplakhotia2013@gmail.com.
BSE & NSE Updates
Sandeep Lakhotia
Significant Pronouncements
CONTENTS
MINISTRY OF CORPORATE AFFAIRS (MCA) ............................................................................................................. 4
1. The Companies (Adjudication of Penalties) Amendment Rules, 2024 ............................. 4
2. The Limited Liability Partnership (Amendment) Rules, 2024 ................................................. 4
3. The Companies (Registration of Foreign Companies) Amendment Rules, 2024 ........... 4
4. The Companies (Indian Accounting Standards) Amendment Rules, 2024..................... 5
RESERVE BANK OF INDIA (RBI) ...................................................................................................................................... 6
5. Frequency of reporting of credit information by Credit Institutions to Credit
Information Companies ................................................................................................................. 6
6. Review of regulatory framework for HFCs and harmonization of regulations
applicable to HFCs and NBFCs .................................................................................................... 6
7. Review of Risk Weights for Housing Finance Companies (HFCs) ........................................ 7
8. Review of Master Direction - Non-Banking Financial Company – Peer to Peer Lending
Platform (Reserve Bank) Directions, 2017 .................................................................................. 7
9. The Foreign Exchange Management (Debt Instruments) (Third Amendment)
Regulations, 2024 ............................................................................................................................. 7
10. The Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment)
Rules, 2024 .......................................................................................................................................... 8
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) ........................................................................................ 9
11. Amendment to Circular for mandating additional disclosures by FPIs that fulfil certain
objective criteria ............................................................................................................................. 9
12. Institutional mechanism by Asset Management Companies for identification and
deterrence of potential market abuse including front-running and fraudulent
transactions in securities ................................................................................................................ 9
13. Modalities for migration of Venture Capital Funds registered under erstwhile SEBI
(Venture Capital Funds) Regulations, 1996 to SEBI (Alternative Investment Funds)
Regulations, 2012 .......................................................................................................................... 10
14. Valuation of Additional Tier- 1 Bonds........................................................................................ 11
15. Amendment to Master Circular for Infrastructure Investment Trusts (InvITs) and Real
Estate Investment Trusts (REITs) dated May 15, 2024 - Board nomination rights to
unitholders of InvITs and REITs .................................................................................................... 11
16. Guidelines for borrowing by Category I and Category II AIFs and maximum permissible
limit for extension of tenure by LVFs ......................................................................................... 12
17. Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities
(REs) ................................................................................................................................................... 12
18. Review of eligibility criteria for entry/exit of stocks in derivatives segment ................. 13
19. Master Circular for Stock Brokers ............................................................................................. 14
20. The SEBI (Alternative Investment Funds) (Fourth Amendment) Regulations, 2024 .... 14
21. The SEBI (Research Analysts) (Second Amendment) Regulations, 2024 ...................... 15
22. SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024 ........ 15
23. SEBI (Intermediaries) (Amendment) Regulations, 2024 ..................................................... 16
24. Consultation Paper on review of the SEBI (Informal Guidance) Scheme, 2003 ........ 16
25. Consultation paper on provisions pertaining to appointment of Public Interest
Directors ........................................................................................................................................... 17

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 26. Consultation paper on Maintenance of Record of Mandatory Communication by
Regulated Entities ......................................................................................................................... 18
27. Review of SEBI (Merchant Bankers) Regulations, 1992 ...................................................... 18
28. Consultation paper on ‘Ease of Doing Business by Substituting the Requirement of
Attestation of certain Documents by a Notary Public/Gazetted Officer’ ................... 19
29. Consultation paper on clarification on the term “pecuniary relationship” of
Debenture Trustee (DT) with the issuer as per Regulation 13A of the DT Regulations20
30. Consultation Paper on Faster Rights Issue with flexibility of allotment to Selective
Investor(s) ........................................................................................................................................ 20
31. Consultation paper on streamlining disclosure in respect of appointment of
Debenture Trustee (DT) in the offer document .................................................................... 21
32. Consultation paper on expanding the scope of Sustainable Finance framework in
the Indian securities market ....................................................................................................... 21
33. Consultation paper on measures towards Ease of Doing Business and streamlining
compliance requirements for Non-Convertible securities – review of LODR
Regulations ..................................................................................................................................... 22
34. Consultation Paper on review of Regulatory Framework for Investment Advisers and
Research Analysts ......................................................................................................................... 23
35. Consultation Paper on Streamlining the process and reduction in timelines of Bonus
Issue (enabling T+2 trading of shares post record date where T being record date) ..
........................................................................................................................................................... 23
BSE & NSE UPDATES.......................................................................................................................................................... 24
36. NSE issued Introduction of additional eligibility criteria for listing on NSE EMERGE .... 24
37. Exemption under Rule 19A of Securities Contract (Regulation) Rules. 1957 (Minimum
Public Shareholding for public sector company) ................................................................ 24
SIGNIFICANT PRONOUNCEMENTS ............................................................................................................................ 25
1. SEBI bans Reliance Home Finance Limited and 23 other entities for 5 (five) years and
imposes penalty on each entity ................................................................................................ 25
2. NFRA imposes monetary penalty of Rs. 10 crores on BSR & Associates LLP and others
for fraudulent diversion of funds by Coffee Day Enterprises Limited ............................... 25
3. SEBI informal guidance to Anjani Portland Cement Limited on minimum public
shareholding .................................................................................................................................... 26

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 MINISTRY OF CORPORATE AFFAIRS (MCA)
1. The Companies (Adjudication of Penalties) Amendment Rules, 2024

The MCA on August 05, 2024 issued the Companies (Adjudication of Penalties)
Amendment Rules, 2024 amending the Companies (Adjudication of Penalties) Rules,
2014. These new rules, which will come into effect from September 16, 2024.

A key amendment is the introduction of Rule 3A, which mandates that all
adjudication proceedings, including issuing notices, filing replies, and attending
hearings, be conducted electronically through an e-adjudication platform
developed by the Central Government. If an email address is unavailable for issuing
notices or summons, the adjudicating officer is required to send the notice by post
and preserve a copy in the electronic record on the platform. Additionally, if no
address is available, the notice will be posted on the e-adjudication platform.

The amendment also includes a substitution of the existing Annexure with a new form
no. ADJ for filing the Memorandum of Appeal pursuant to Section 454(5) of the
Companies Act, 2013 and rule 4(1) of the Companies (Adjudication of Penalties)
Rules, 2014.

Link to the Circular:

https://www.mca.gov.in/bin/dms/getdocument?mds=ksyWu6kmYbS46oyUYmt6cw
%253D%253D&type=open

2. The Limited Liability Partnership (Amendment) Rules, 2024

The MCA on August 05, 2024 has issued Limited Liability Partnership (Amendment)
Rules, 2024 amending the Limited Liability Partnership (LLP) Rules, 2009, under the
Limited Liability Partnership Act, 2008. The changes will come into effect on August
27, 2024.

The amendments introduce several significant updates to Rule 37 of the LLP Rules.
Notably, the term "the Centre for Processing Accelerated Corporate Exit" will now be
included after each mention of "Registrar" in sub-rules (1), (3), and (4) of Rule 37. An
explanatory note has also been added, defining the Centre for Processing
Accelerated Corporate Exit as the office established under notification S.O. 1269(E)
dated 17th March 2023, as per the Companies Act, 2013.

Link to the Notification:

https://www.mca.gov.in/bin/dms/getdocument?mds=mvMzerxrXhRIKJfJXltgrg%253
D%253D&type=open

3. The Companies (Registration of Foreign Companies) Amendment Rules, 2024

The MCA on August 12, 2024 issued the Companies (Registration of Foreign
Companies) Amendment Rules, 2024 amending the Companies (Registration of
Foreign Companies) Rules, 2014. These rules, set to take effect from September 09,

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 2024.

The key amendments include the replacement of the term "registrar" with "Registrar,
Central Registration Centre" in Rule 3, sub-rule (3). Additionally, a new proviso has
been added to Rule 8, sub-rule (1), stipulating that documents for registration by a
foreign company must be submitted in Form FC-1 to the Registrar, Central Registration
Centre.

Link to the Notification:

https://www.mca.gov.in/bin/dms/getdocument?mds=nKOST6cNFJSgJGLOIBu6Yg%
253D%253D&type=open

4. The Companies (Indian Accounting Standards) Amendment Rules, 2024

The MCA on August 12, 2024 notified the Companies (Indian Accounting Standards)
Amendment Rules, 2024 amending the Companies (Indian Accounting Standards)
Rules, 2015. These rules, which come into force on the date of their publication in the
Official Gazette i.e. August 12, 2024.

The amendments pertain to updates in the “Annexure” under the heading “B. Indian
Accounting Standards (Ind AS).” The specific updates include modifications to Ind AS
101, Ind AS 103, and the removal of Ind AS 104. This change reflects the ongoing
efforts to align accounting practices with the latest financial reporting standards.

A key aspect of these amendments is the introduction of Ind AS 117, which entirely
replaces Ind AS 104, providing a more robust framework for the accounting of
insurance contracts. Ind AS 117 establishes principles for recognising, measuring,
presenting and disclosing insurance contracts. The objective is to ensure that an
entity provides relevant information that faithfully represents those contracts. An
entity must apply Ind AS 117 to insurance, reinsurance, and investment contracts.

Link to the Notification:

https://www.mca.gov.in/bin/dms/getdocument?mds=4iwngdxt9oFj%252Bpp05r1EZ
A%253D%253D&type=open

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 RESERVE BANK OF INDIA (RBI)

5. Frequency of reporting of credit information by Credit Institutions to Credit Information

Companies

The RBI on August 08, 2024 issued new guidelines regarding the frequency of credit
information reporting by credit institutions to credit information companies. Effective
from January 01, 2025, all commercial banks (excluding payments banks), primary
co-operative banks, state and central co-operative banks, all-India financial
institutions, non-banking financial companies, asset reconstruction companies, and
credit information companies are required to adhere to the following updated
reporting schedule:

a. Credit institutions (CIs) must now submit credit information to credit information
companies (CICs) on a fortnightly basis—specifically on the 15th and the last day
of each month.
b. The submission of credit information by CIs to CICs must occur within 7 (seven)
calendar days of the reporting fortnight. Additionally, CICs are required to process
and ingest this data within five calendar days of receipt.
c. CICs will be responsible for reporting non-compliance with these reporting
timelines to the Department of Supervision at the RBI on a half-yearly basis (31st
March and 30th September). Institutions failing to adhere to these new timelines
will face penal actions under the Credit Information Companies (Regulation) Act,
2005 (CICRA, 2005).

Link to the Notification:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12718&Mode=0

6. Review of regulatory framework for HFCs and harmonization of regulations applicable

to HFCs and NBFCs

The RBI has issued a circular outlining a comprehensive review and harmonization of
the regulatory framework governing Housing Finance Companies (HFCs) and Non-
Banking Finance Companies (NBFCs).

Following the transfer of HFC regulation from the National Housing Bank (NHB) to the
RBI on August 09, 2019, HFCs have been regulated under the broader category of
NBFCs. The RBI’s latest review reflects this policy stance and aims to refine regulations
for both sectors. The revised regulations are designed to address the specialized
nature of HFCs while ensuring alignment with NBFC regulations.

Effective January 01, 2025, revised regulations will be introduced, detailed in the
Annex to the circular:

Part A: Updates for HFCs

Part B: Updates for NBFCs

Link to the Notification:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12719&Mode=0
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7. Review of Risk Weights for Housing Finance Companies (HFCs)

The RBI has issued a circular on August 12, 2024 regarding the risk weights for Housing
Finance Companies (HFCs), marking important updates to the regulatory framework.
This revision aims to address discrepancies in the computation of risk-weighted assets
and adjust the risk weights for specific categories of exposures.

The updates include following changes:

a. To correct a potential anomaly in the computation of risk-weighted assets for

undisbursed housing and other loans, the RBI has decided that the risk-weighted
assets for undisbursed amounts will be capped at the risk-weighted asset
computed on a notional basis for an equivalent amount of disbursed loans. This
change is intended to align the treatment of undisbursed loans more closely with
that of disbursed loans.
b. For fund-based and non-fund based exposures to ‘Commercial Real Estate -
Residential Building’ classified as standard, the risk weight has been set at 75%
(seventy-five percent). Exposures not classified as standard will be treated under
the ‘Other Assets (Others)’ category, which currently carries a risk weight of 100%
(Hundred percent).

Link to the Notification:

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12704&Mode=0

8. Review of Master Direction - Non-Banking Financial Company – Peer to Peer Lending

Platform (Reserve Bank) Directions, 2017

The RBI has issued updated guidelines concerning the Master Direction - Non-Banking
Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017.
This review addresses operational issues identified in the peer-to-peer (P2P) lending
sector and introduces key modifications to enhance regulatory clarity and
compliance.

The updated provisions include detailed clarifications to prevent practices that

undermine the intended intermediary role of P2P platforms. These changes are
outlined in the Annex to the circular. Most of the amended provisions will be effective
immediately. However, the provision specified in item I(f)(ii) of the Annex will come
into effect 90 (ninety) days from the date of the circular.

Link to the Notification:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12721&Mode=0

9. The Foreign Exchange Management (Debt Instruments) (Third Amendment)

Regulations, 2024

The RBI issued the Foreign Exchange Management (Debt Instruments) (Third
Amendment) Regulations, 2024 amending the Foreign Exchange Management
(Debt Instruments) Regulations, 2019.

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 Key amendments include:

a. A new sub-paragraph (F) has been added to Paragraph 1 of Schedule 1,

permitting non-residents to purchase Sovereign Green Bonds issued by the
Government of India. These bonds can be acquired through securities accounts
with depositories in the International Financial Services Centre (IFSC) in India.
b. Clause (4B) now specifies that payments for these Sovereign Green Bonds must
be made either via inward remittances from abroad or from funds held in foreign
currency accounts, as per RBI and IFSC Authority regulations.
c. Under Clause (2B) of Paragraph 4, proceeds from the sale or maturity of these
instruments (after applicable taxes) can be remitted outside India.

Link to the Notification:

https://rbidocs.rbi.org.in/rdocs/content/pdfs/Gazette396_29082024.pdf

10. The Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment)

Rules, 2024

The RBI issued the Foreign Exchange Management (Non-Debt Instruments) (Fourth
Amendment) Rules, 2024 amending the Foreign Exchange Management (Non-Debt
Instruments) Rules, 2019.

Key amendments include:

a. Cross-border Share Swaps: Facilitates the issuance or transfer of equity instruments

between Indian and foreign companies, simplifying cross-border mergers,
acquisitions, and strategic partnerships. This enables Indian companies to expand
globally, accessing new markets and enhancing their international presence.
b. FDI in White Label ATMs: Permits 100% (hundred percent) Foreign Direct Investment
(FDI) under the Automatic Route for White Label ATMs. This initiative aims to boost
financial inclusion by allowing non-banking entities to own and operate ATMs
across the country.
c. Definition of 'Startup Company': Aligns the definition of a ‘Startup Company’ with
the 2019 notification from the Department of Industry and Internal Trade. As per
the notification, an entity is considered a startup for up to 10 (ten) years from the
date of incorporation/registration, provided it is a private limited company
(Companies Act, 2013), a partnership firm (Partnership Act, 1932), or a limited
liability partnership. Additionally, the entity’s turnover must not have exceeded
INR 100 (hundred) crore in any financial year since incorporation/registration.

Link to the Notification:

https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/aug/doc20
24816377701.pdf

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 SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

11. Amendment to Circular for mandating additional disclosures by FPIs that fulfil certain
objective criteria

SEBI has amended provisions concerning Foreign Portfolio Investors (FPIs) through a
circular issued on August 1, 2024, revising disclosure requirements for FPIs meeting
specific criteria.

Key updates include an exemption for University Funds and University-related

Endowments from additional disclosure obligations under the FPI Master Circular. To
qualify for this exemption, entities must:

a. Maintain Indian equity assets under management (AUM) below 25% (twenty-five)
of their global AUM.
b. Have a global AUM exceeding INR 10,000 (ten thousand) crore.
c. Provide evidence of non-profit status through appropriate tax filings in their home
jurisdiction.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-circular-for-
mandating-additional-disclosures-by-fpis-that-fulfil-certain-objective-
criteria_85371.html

12. Institutional mechanism by Asset Management Companies for identification and

deterrence of potential market abuse including front-running and fraudulent
transactions in securities

SEBI has released circular dated August 5, 2024, aimed at enhancing the institutional
mechanisms within Asset Management Companies (AMCs) to tackle market abuse,
including front-running and fraudulent transactions.

Key provisions from the circular includes:

a. AMCs are now mandated to implement comprehensive systems to identify and

prevent market abuse. This includes enhanced surveillance, internal controls, and
procedures for addressing misconduct such as front-running and insider trading.
b. The Chief Executive Officer (CEO) or Managing Director, alongside the Chief
Compliance Officer, will be accountable for ensuring the effectiveness of the new
mechanisms.
c. AMCs must develop systems to generate and process alerts on potential market
abuse in a timely manner, reviewing all relevant communications and logs.
d. AMCs are required to establish written policies for investigating and responding to
potential abuses, with these SOPs needing approval from their Boards of Directors.
e. AMCs must take appropriate actions, including suspension or termination of
employees or entities involved in suspicious activities.
f. An escalation process must be in place to inform the Board of Directors about
potential abuses, and AMCs must have a documented whistleblower policy.

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 g. AMCs are expected to regularly review and update their procedures and systems.
h. Stock exchanges and depositories will collaborate with AMFI to facilitate data
sharing with AMCs for effective monitoring.
i. AMCs must report examined alerts and actions taken to SEBI through the
Compliance Test Report (CTR) and Half-Yearly Trustee Report (HYTR).

AMFI will provide detailed implementation standards within 15 (fifteen) days of this
circular.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/institutional-mechanism-by-asset-
management-companies-for-identification-and-deterrence-of-potential-market-
abuse-including-front-running-and-fraudulent-transactions-in-securities_85468.html

13. Modalities for migration of Venture Capital Funds registered under erstwhile SEBI
(Venture Capital Funds) Regulations, 1996 to SEBI (Alternative Investment Funds)
Regulations, 2012

SEBI has issued new guidelines for Venture Capital Funds (VCFs) registered under the
erstwhile SEBI (Venture Capital Funds) Regulations, 1996, to migrate to the SEBI
(Alternative Investment Funds) Regulations, 2012.

Key highlights include:

1. Migration Process:
a. VCFs wishing to migrate must apply to SEBI by July 19, 2025.
b. Applications must include the original registration certificate and requisite
information as per the provided format.
2. Conditions for Migration:
a. For VCFs with Ongoing Schemes: If schemes have a disclosed tenure, they will
retain it post-migration. If tenure is not disclosed, the residual tenure must be
determined with the approval of 75% (seventy-five percent) of investors.
b. For VCFs with Unwound Schemes: VCFs with schemes that have not been
wound up post-liquidation period can apply for migration, provided there are
no pending investor complaints. Further, a 1 (one) year additional liquidation
period is available until July 19, 2025.
3. Post-Migration Provisions:
a. Upon migration, all investments and units held by VCFs will be recognized
under the new AIF framework.
b. Migrated VCFs must comply with SEBI’s Master Circular for AIFs and other
relevant regulations.
4. Non-Migration Consequences:
a. VCFs not migrating must adhere to enhanced regulatory reporting or face
appropriate actions for continuing beyond their original liquidation periods.
5. Exclusions:
a. VCFs with all schemes wound up or those with no new investments cannot
migrate and must apply for registration surrender by March 31, 2025.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/modalities-for-migration-of-
venture-capital-funds-registered-under-erstwhile-sebi-venture-capital-funds-
regulations-1996-to-sebi-alternative-investment-funds-regulations-2012_85914.html
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14. Valuation of Additional Tier- 1 Bonds

SEBI has issued circular dated August 5, 2024, regarding the valuation of Additional
Tier 1 (AT-1) Bonds. This update is aligned with recommendations from the National
Financial Reporting Authority (NFRA).

SEBI has adopted the Yield to Call (YTC) methodology for valuing AT-1 Bonds. This
change aligns with market practices where AT-1 bonds typically trade at or near YTC
prices. The valuation will be adjusted with appropriate risk spreads as per Ind AS 113
guidelines.

For purposes other than valuation, the deemed maturity date for perpetual bonds will
continue to be governed by the existing guidelines outlined in the Master Circular
dated June 27, 2024.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/valuation-of-additional-tier-1-
bonds_85470.html

15. Amendment to Master Circular for Infrastructure Investment Trusts (InvITs) and Real
Estate Investment Trusts (REITs) dated May 15, 2024 - Board nomination rights to
unitholders of InvITs and REITs

SEBI has notified circulars dated August 6, 2024, amending the Master Circular for
Infrastructure Investment Trusts (InvITs) and Master Circular for Real Estate Investment
Trusts (REITs) both dated May 15, 2024. This amendment addresses the board
nomination rights of unitholders in InvITs and REITs.

The amendment provides clarity on the right of unitholders to nominate directors to

the board of directors of the Investment Manager. Previously, if an entity or its
associate had the right to nominate directors in other capacities (e.g., as a
shareholder or lender), this could restrict the entity's right to nominate a director as a
unitholder. The new proviso now clarifies that this restriction does not apply if the
nomination right is provided under clause (e) of sub-regulation (1) of regulation 15 of
the SEBI (Debenture Trustees) Regulations, 1993.

Link to the Circular:

a. https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-master-circular-
for-infrastructure-investment-trusts-invits-dated-may-15-2024-board-nomination-
rights-to-unitholders-of-invits_85491.html
b. https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-master-circular-
for-real-estate-investment-trusts-reits-dated-may-15-2024-board-nomination-
rights-to-unitholders-of-reits_85493.html

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16. Guidelines for borrowing by Category I and Category II AIFs and maximum
permissible limit for extension of tenure by LVFs

SEBI has announced significant updates to the guidelines governing Alternative

Investment Funds (AIFs) and Large Value Funds for Accredited Investors (LVFs) vide
circular dated August 19, 2024

Key changes include:

1. Borrowing by Category I and Category II AIFs:

a. AIFs can now borrow to cover temporary shortfalls in drawdown amounts,
provided the shortfall occurs despite best efforts to collect from investors. The
borrowing limit is capped at 20% (twenty percent) of the investment amount or
10% (ten percent) of investable funds, whichever is lower.
b. Such borrowings must be disclosed in the Private Placement Memorandum (PPM)
and are only permitted in emergencies.
c. AIFs must observe a 30 (thirty) day cooling-off period between borrowings,
calculated from the repayment date of previous borrowings.

2. Extension of Tenure for LVFs:

a. LVFs may extend their tenure by up to 5 (five) years with approval from two-thirds
of unit holders by value.

Existing LVF schemes must align their extension periods with the new regulations by
November 18, 2024. They are required to submit revised extension periods and obtain
consent from all investors.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/guidelines-for-borrowing-by-
category-i-and-category-ii-aifs-and-maximum-permissible-limit-for-extension-of-
tenure-by-lvfs_85909.html

17. Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities
(REs)

SEBI has announced a new Cybersecurity and Cyber Resilience Framework (CSCRF)
aimed at bolstering the cyber defenses of regulated entities across India’s financial
markets. This framework, detailed in circular supersedes earlier directives and seeks to
address evolving cyber threats by establishing robust cybersecurity standards.

Key Aspects of CSCRF are as follows:

1. The CSCRF aims to strengthen resilience against cyber incidents, align with industry
standards, and ensure efficient auditing and compliance. It introduces
standardized reporting formats to streamline compliance.
2. Framework Structure includes:
a. Part I: Defines objectives, standards, and compliance matrices, including audit
report timelines.
b. Part II: Provides guidelines on implementing standards and achieving
cybersecurity goals.
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 c. Part III: Includes formats for compliance reporting.
d. Part IV: Outlines guidelines for auditors, cyber resilience testing, and measures
for monitoring and evaluating cybersecurity capabilities.
3. The framework incorporates five core goals from CERT-In’s Cyber Crisis
Management Plan: anticipate, withstand, contain, recover, and evolve. These
goals are linked with critical cybersecurity functions such as governance,
identification, protection, detection, response, and recovery.
4. Entities are classified into categories based on their size and operational scale,
including Market Infrastructure Institutions, Qualified, Mid-size, Small-size, and Self-
certified entities. Each category has tailored standards and requirements.
5. The framework mandates that all regulated entities establish effective SOCs. For
smaller entities that may struggle with the costs and expertise required to set up
their own SOCs, SEBI has directed the NSE and BSE to establish a Market SOC (M-
SOC) to provide essential cybersecurity services.
6. The CSCRF applies to a wide range of SEBI-regulated entities, including Alternative
Investment Funds, Bankers to an Issue, Clearing Corporations, Mutual Funds,
Custodians.

This comprehensive framework is expected to significantly enhance the cybersecurity

landscape within India’s financial markets, ensuring that regulated entities are well-
prepared to handle and mitigate cyber threats effectively.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/cybersecurity-and-cyber-
resilience-framework-cscrf-for-sebi-regulated-entities-res-_85964.html

18. Review of eligibility criteria for entry/exit of stocks in derivatives segment

The SEBI has announced a significant update to the eligibility criteria for stocks
entering or exiting the derivatives segment. This move aims to enhance market depth
and protect investor interests by ensuring only high-quality stocks participate in
derivatives trading.

Key changes include:

1. Entry Criteria Adjustments:

a. Median Quarter Sigma Order Size (MQSOS): The minimum MQSOS for a stock
to qualify for the derivatives segment has been increased from INR 25 (twenty-
five) lakhs to INR 75 (seventy-five) lakhs.
b. Market Wide Position Limit (MWPL): The required MWPL has been raised from
INR 500 (five hundred) crores to INR 1,500 (fifteen hundred) crores.
c. Average Daily Delivery Value (ADDV): The threshold for ADDV has been
increased from INR 10 (ten) crores to INR 35 (thirty-five) crores.

2. Exit Criteria Revisions:

a. Stocks failing to meet the updated criteria for a continuous period of 3 (three)
months will be removed from the derivatives segment. Existing contracts will
continue to be traded until expiry, but no new contracts will be issued.
b. Stocks will have a 3 (three) month gestation period before the new exit criteria
apply.
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 3. Product Success Framework (PSF) for Stock Derivatives:
a. New PSF criteria include requirements for active trading member participation,
minimum trading days, average daily turnover, and notional open interest.
b. Stocks not meeting the PSF criteria for 3 (three) consecutive months will face
similar exit conditions.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/aug-2024/review-of-eligibility-criteria-for-
entry-exit-of-stocks-in-derivatives-segment_86373.html

19. Master Circular for Stock Brokers

The SEBI has released an updated Master Circular for Stock Brokers, effective August
9, 2024. This new circular consolidates and supersedes the previous Master Circular
dated May 22, 2024.

The circular ensures that any ongoing applications or rights accrued under the
rescinded circulars will not be affected by the change. Penalties or legal proceedings
related to the old guidelines will proceed as if the previous circulars had not been
rescinded.

Link to the Circular:

https://www.sebi.gov.in/legal/master-circulars/aug-2024/master-circular-for-stock-
brokers_85605.html

20. The SEBI (Alternative Investment Funds) (Fourth Amendment) Regulations, 2024

The SEBI has announced the SEBI (Alternative Investment Funds) (Fourth Amendment)
Regulations, 2024, marking an important update to the regulatory framework
governing alternative investment funds (AIFs).

Key Amendments:
a. Omission of Operational Requirement Clause: Regulation 3, sub-regulation (4),
clause (b) has removed the requirement to meet "day-to-day operational
requirements" from the operational scope, potentially simplifying compliance for
AIFs.
b. Extension of Fund Tenure: Large Value Funds: Regulation 13, sub-regulation (5) now
allows large value funds for accredited investors to extend their tenure up to 5
(five) years. This extension requires approval from two-thirds of unit holders by value
and is subject to conditions specified by SEBI.
c. Borrowing and Leverage Restrictions:
i. Category I AIFs: Regulation 16, sub-regulation (1), clause (c) has updated
borrowing rules, permitting Category I AIFs to borrow funds for temporary and
operational needs for up to 30 (thirty) days, not exceeding 10% (ten percent)
of investable funds. This includes creating encumbrances on equity in
infrastructure projects, subject to SEBI’s conditions.
ii. Category II AIFs: Regulation 17, clause (c) aligns Category II AIFs with similar
borrowing restrictions, allowing temporary borrowings under specified
conditions and also permitting encumbrances on equity in infrastructure
14
 projects.

Link to the Notification:

https://www.sebi.gov.in/legal/regulations/aug-2024/securities-and-exchange-
board-of-india-alternative-investment-funds-fourth-amendment-regulations-
2024_85550.html

21. The SEBI (Research Analysts) (Second Amendment) Regulations, 2024

The SEBI on August 19, 2024 has notified the SEBI (Research Analysts) (Second
Amendment) Regulations, 2024 amending the Securities and Exchange Board of India
(Research Analysts) Regulations, 2014.

A new regulation, 15A, has been added to the existing framework. This regulation
stipulates that research analysts are now permitted to charge fees for providing
research services to clients, including accredited investors. The specific manner in
which these fees can be charged will be determined by SEBI.

Link to the Notification:

https://www.sebi.gov.in/legal/regulations/aug-2024/securities-and-exchange-
board-of-india-research-analysts-second-amendment-regulations-2024_86005.html

22. SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024

The SEBI August 26, 2024 has notified the SEBI (Depositories and Participants) (Second
Amendment) Regulations, 2024. These new regulations, which come into force
immediately, aim to enhance the regulatory framework governing the operations of
depositories and their associated entities.

Key changes include:

1. New Restrictions on Associations:

a. Regulation 82B introduces restrictions on depositories and their agents from
having any direct or indirect association with individuals or entities that
provide securities advice or performance claims unless they are registered
with SEBI. This is designed to prevent conflicts of interest and ensure that only
authorized entities engage in such activities.
b. The new rules provide an exception for associations through specified digital
platforms that meet SEBI's criteria for preventing misuse. These platforms must
have mechanisms for both preventive and corrective actions to ensure
compliance.
2. Definitions and Clarifications:
a. The term "association" now explicitly includes financial transactions, client
referrals, IT system interactions, and other similar connections.
b. The regulations clarify that entities involved in investor education are not
covered by these restrictions, provided they do not engage in unauthorized
advisory or performance claims.
3. Enforcement and Penalties:
a. SEBI reserves the right to take appropriate actions, including those under the
SEBI (Intermediaries) Regulations, 2008, in cases of violations of these new
15
 provisions.

Link to the Notification:

https://www.sebi.gov.in/legal/regulations/aug-2024/securities-and-exchange-
board-of-india-depositories-and-participants-second-amendment-regulations-
2024_86337.html

23. SEBI (Intermediaries) (Amendment) Regulations, 2024

The SEBI on August 26, 2024 has notified the SEBI (Intermediaries) (Amendment)
Regulations, 2024. This amendment aims to strengthen the regulatory framework for
intermediaries by introducing new restrictions on their associations and interactions.

Key highlights include:

1. New Restrictions on Associations:
a. Under the new Chapter IIIA, persons regulated by SEBI and their agents are
prohibited from having direct or indirect associations with individuals or
entities that provide securities advice or make performance claims unless
those individuals or entities are properly registered or permitted by SEBI.
b. An exception is made for associations through specified digital platforms
that meet SEBI’s criteria for preventive and curative measures. These
platforms must ensure they do not facilitate unauthorized advisory or
performance claims.
2. Definitions and Clarifications:
a. Persons Regulated by SEBI includes entities such as asset management
companies, investment managers of alternative investment funds, and
managers of real estate investment trusts.
b. The regulation defines "association" to include financial transactions, client
referrals, IT system interactions, and other similar connections.
c. Entities involved in investor education are excluded from these restrictions
as long as they do not engage in unauthorized advisory or performance
claims.
3. Enforcement and Penalties:
a. SEBI retains the authority to take appropriate actions, including those under
Chapter V of the Securities and Exchange Board of India (Intermediaries)
Regulations, 2008, in cases of non-compliance.

Link to the Notification:

https://www.sebi.gov.in/legal/regulations/aug-2024/securities-and-exchange-
board-of-india-intermediaries-amendment-regulations-2024_86338.html

24. Consultation Paper on review of the SEBI (Informal Guidance) Scheme, 2003

SEBI is proposing revisions to its Informal Guidance (IG) Scheme to enhance its
efficiency and adapt to technological advancements. The primary change involves
establishing a centralized nodal coordination cell with a dedicated email address for
handling applications. This shift aims to streamline the application process by moving
from physical letters to electronic communications, allowing for quicker and more
efficient processing. Under the new scheme, applicants will have up to 15 (fifteen)
16
 days to respond to SEBI's requests for clarifications, with this period excluded from the
overall 60-day processing timeline. Additionally, the fee for applications is proposed
to increase from INR 25,000 (twenty-five thousand) to INR 75,000 (seventy-five
thousand), and the processing fee from INR 5,000 (five thousand) to INR 15,000 (fifteen
thousand).

The revised draft of the SEBI (Informal Guidance) Scheme, 2024 is open for public
comments until September 15, 2024. Key proposals for public feedback include
expanding the list of eligible applicants to include various regulated entities, updating
obsolete provisions, and creating a dedicated online application process. The revised
scheme will replace the existing 2003 version, and the updated provisions will be
implemented once the new scheme is officially published. Interested parties can
submit comments or report technical issues via designated email addresses provided
by SEBI.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-review-of-the-securities-and-exchange-board-of-india-informal-guidance-
scheme-2003_86350.html

25. Consultation paper on provisions pertaining to appointment of Public Interest Directors

The "Consultation Paper on Provisions Pertaining to Appointment of Public Interest

Directors (PIDs)" aims to seek public feedback on improving the process for appointing
PIDs to market infrastructure institutions (MIIs) such as stock exchanges, clearing
corporations, and depositories. Key proposals include enhancing shareholder
involvement in the appointment process, simplifying documentation requirements,
allowing fixed stipends for PIDs in addition to sitting fees, and reducing the cooling-off
period for reappointments. The paper acknowledges that while SEBI currently
approves PID appointments, this bypasses shareholder approval, a process
discrepancy from independent director appointments in regular companies. To
address these concerns, the paper suggests two options: maintaining the current SEBI-
centric process or incorporating shareholder approval alongside SEBI's.

The paper also proposes simplifying the documentation required for PID appointments
and considering a fixed remuneration model similar to those applied to non-executive
directors in banks. The intention is to make the role of PIDs more attractive and feasible
by addressing the burdensome paperwork and potentially providing a fixed
remuneration up to Rs. 30 (thirty) akhs annually, aligning with recent RBI guidelines for
non-executive directors. Feedback is sought on whether to retain the current process
or adopt new procedures that include shareholder input and how to balance
documentation requirements and remuneration for PIDs.

Public comments are invited latest by September 12, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-provisions-pertaining-to-appointment-of-public-interest-directors-_86313.html

17
26. Consultation paper on Maintenance of Record of Mandatory Communication by
Regulated Entities

The SEBI has issued a draft notification proposing amendments to several sets of
regulations concerning various financial entities and professionals. These changes are
designed to standardize and extend the record-keeping requirements across different
sectors of the financial industry. Specifically, the amendments introduce a new
regulation mandating that all regulated entities—such as stock brokers, merchant
bankers, registrars, debenture trustees, and others—must maintain records of
mandated communications and their acknowledgments for a minimum of eight
years. These records must be made available to SEBI upon request.

The draft notification outlines the amendments to multiple regulations, including those
for stock brokers, merchant bankers, registrars, and credit rating agencies, among
others. The aim is to ensure consistency in how these entities handle and retain records
of communications, enhancing transparency and regulatory oversight. Each
amended regulation specifies the need for maintaining detailed records of
communications and making these records available to SEBI when required. This
comprehensive approach reflects SEBI's intent to strengthen the regulatory framework
by imposing uniform documentation practices across various financial sectors.

Public comments are invited latest by September 13, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-maintenance-of-record-of-mandatory-communication-by-regulated-
entities_86309.html

27. Review of SEBI (Merchant Bankers) Regulations, 1992

The SEBI has released a consultation paper on August 28, 2024, aimed at revising the
SEBI (Merchant Bankers) Regulations, 1992. The paper seeks public feedback on
proposed amendments to update the regulatory framework for merchant bankers.
The regulations, originally implemented in 1992, have become outdated due to
significant changes in market dynamics over the past three decades. The proposed
revisions aim to align the regulations with contemporary market conditions, enhance
capital adequacy requirements, and refine permissible activities for merchant
bankers.

Currently, the regulations specify that merchant bankers must maintain a minimum
net worth of Rs. 5 (five) crore, a threshold established in 1995. Given the growth in the
Indian capital markets, including increased market capitalization and investor
participation, there is a proposal to raise this requirement to better reflect current
economic conditions. The consultation paper suggests a new categorization system
for merchant bankers: Category 1 for those with a net worth of Rs. 50 (fifty) crore, and
Category 2 for those with Rs. 10 (ten) crore. Category 1 entities would be permitted to
undertake all types of activities, while Category 2 entities would be restricted from
handling Main Board Public Issues.

18
 Additionally, the paper proposes restrictions on the activities merchant bankers can
undertake. Currently, some activities performed by merchant bankers fall outside
SEBI’s jurisdiction, such as private placements for unlisted companies and certain
advisory services. The proposed regulations would limit merchant bankers to activities
directly related to the securities market and under SEBI’s purview. Merchant bankers
would be required to segregate non-permitted activities into separate legal entities.
The consultation also recommends that merchant bankers should not engage in
valuation activities unless explicitly authorized by SEBI, to avoid overlapping with
regulated valuation professions.

Finally, the paper addresses the issue of merchant bankers not engaging in permitted
activities. It suggests introducing a provision for the cancellation of registration for
those failing to participate in SEBI-approved activities, which was not previously
specified. This measure aims to ensure that only active and compliant entities remain
in the market. SEBI is seeking stakeholder feedback on these proposals to ensure the
revised regulations effectively address current market needs and risks.

Public comments are invited latest by September 18, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/review-of-securities-
and-exchange-board-of-india-merchant-bankers-regulations-1992_86222.html

28. Consultation paper on ‘Ease of Doing Business by Substituting the Requirement of

Attestation of certain Documents by a Notary Public/Gazetted Officer’

The consultation paper seeks public feedback on a proposed regulatory change

aimed at simplifying document verification processes in India. Specifically, it proposes
substituting the current requirement for documents to be attested by a Notary Public
or Gazetted Officer with a requirement for self-attestation. This change is intended to
streamline procedures and reduce administrative burdens for businesses and
individuals involved with SEBI regulations.

The background highlights that several SEBI regulations currently mandate notarized
or gazetted attestations for various applications and documents, which adds to
compliance costs and delays. The paper references a report from the Company Law
Committee advocating for self-declaration as a more efficient alternative to
affidavits, which have been deemed outdated and unnecessarily burdensome. The
proposal aims to align with broader government efforts to ease business operations
by minimizing bureaucratic hurdles. Public comments on this proposal are invited until
September 6, 2024, to gather input before finalizing the changes.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-ease-of-doing-business-by-substituting-the-requirement-of-attestation-of-certain-
documents-by-a-notary-public-gazetted-officer_86032.html

19
29. Consultation paper on clarification on the term “pecuniary relationship” of Debenture
Trustee (DT) with the issuer as per Regulation 13A of the DT Regulations

The consultation paper seeks public feedback on proposed amendments to the SEBI
(Debenture Trustees) Regulations, 1993, aimed at improving the ease of doing business
for Debenture Trustees (DTs). This initiative aligns with the Finance Minister's budgetary
goals for FY 2023-24, which emphasize reducing compliance costs and streamlining
processes within the financial sector. SEBI has formed working groups to recommend
simplifications, including clarifying the "pecuniary relationship" requirement under
Regulation 13A, which affects the eligibility of DTs.

Currently, Regulation 13A restricts the appointment of DTs who have a pecuniary
relationship with an issuer exceeding specific financial thresholds. The working group
recommends excluding DT remuneration from this assessment to align with existing
Companies Act provisions. Additionally, it proposes that issuers disclose the proportion
of DT remuneration related to debenture trusteeship versus other services in their offer
documents. This proposal aims to enhance transparency and consistency. The
consultation invites comments on these recommendations by September 11, 2024,
through an online submission form.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-clarification-on-the-term-pecuniary-relationship-of-debenture-trustee-dt-with-the-
issuer-as-per-regulation-13a-of-the-dt-regulations_85989.html

30. Consultation Paper on Faster Rights Issue with flexibility of allotment to Selective
Investor(s)

The consultation paper outlines the requirements for a company's letter of offer in the
context of issuing securities, focusing on several critical aspects. When a company is
acquiring a business or an interest in a business, it must provide a detailed report from
accountants on the financial performance of that business over the past 3 (three)
financial years, including profits, losses, assets, and liabilities. Additionally, if the
acquisition results in the company holding over 50% (fifty percent) interest in the
business, pro forma financial statements certified by a statutory auditor may also be
included.

The issuer must also detail the use of proceeds from the issue, including firm financial
arrangements for at least 75% (seventy-five percent) of the stated means of finance
and the funding plan for the remaining portion. They must disclose the scope and cost
of any appraisal related to the project, the schedule of implementation, and the
deployment of funds. If applicable, the issuer needs to provide a breakdown of
expenses related to the issue, including brokerage, legal fees, and advertising, and
detail any special tax benefits and industry regulations affecting the issue.

Further, the document requires information on the management structure, including

details of the board of directors and senior management. Financial information must
be included from the audited financial statements and interim reports. The rationale
behind the issue price should be explained, and the issuer must ensure compliance
with all regulatory approvals and disclose any pending government approvals or legal
20
 issues. Finally, the letter of offer must include specifics about the process for
application, allotment, and refund procedures, as well as any restrictions on foreign
investment and statutory disclosures.

Public comments with rationale are invited latest by September 10, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-faster-rights-issue-with-flexibility-of-allotment-to-selective-investor-s-_85960.html

31. Consultation paper on streamlining disclosure in respect of appointment of Debenture

Trustee (DT) in the offer document

The consultation paper from the Department of Debt and Hybrid Securities, issued on
August 17, 2024, seeks public input on proposed changes to streamline the disclosure
process for Debenture Trustees (DTs) in offer documents. The primary proposal under
review is to replace the term "consent letter" with "debenture trustee agreement"
(DTA) in clause 3.3.32 of Schedule I of the SEBI (Issue and Listing of Non-Convertible
Securities) Regulations, 2021. The DTA, which is the legally binding document between
the issuer and the DT, would be made accessible to investors via a QR code included
in the offer document. This change aims to clarify and update the legal framework,
as the current "consent letter" lacks formal legal standing and does not reflect the true
nature of the agreement.

The consultation paper is part of a broader initiative announced in the FY 2023-24

budget to simplify and reduce compliance costs in the financial sector. This initiative
aligns with recommendations from a working group and SEBI's Corporate Bonds and
Securitization Advisory Committee (CoBoSAC). The deadline for public comments on
this proposal is September 6, 2024 through an online web form or via email for
technical issues.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-streamlining-disclosure-in-respect-of-appointment-of-debenture-trustee-dt-in-the-
offer-document_85692.html

32. Consultation paper on expanding the scope of Sustainable Finance framework in the
Indian securities market

The consultation paper issued by SEBI seeks public input on proposals to broaden the
scope of the sustainable finance framework in India’s securities market. The aim is to
align with the Finance Minister's budget announcements for FY 2023-24, which focus
on simplifying compliance and enhancing ease of doing business. Key
recommendations include redefining "green debt securities" to "sustainability-linked
securities" to cover a broader range of sustainable finance instruments and expanding
the regulatory framework to include Social Bonds, Sustainable Bonds, and
Sustainability-linked Bonds alongside existing Green Debt Securities. This expansion is
intended to better align with global practices and support India's climate
commitments.

The paper also proposes the introduction of Sustainable Securitised Debt Instruments,
21
 which would allow for the issuance of securities backed by underlying sustainable
credit facilities. This would help tap into the bond market’s potential to fill the financing
gap for Sustainable Development Goals (SDGs). Additionally, there is a proposal to
require independent external reviews for all ESG Debt Securities and Sustainable
Securitised Debt Instruments to ensure transparency and credibility. Comments are
invited on these proposals, including the appropriateness of the frameworks and
potential additional guidelines latest by September 6, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-expanding-the-scope-of-sustainable-finance-framework-in-the-indian-securities-
market_85691.html

33. Consultation paper on measures towards Ease of Doing Business and streamlining
compliance requirements for Non-Convertible securities – review of LODR Regulations

The proposed revisions to the SEBI (LODR) Regulations, 2015 focus on streamlining
compliance requirements for entities with listed non-convertible securities and
aligning them with equity listed entities.

Key recommendations include:

a. There is a proposal to standardize the definitions of "fraud" and "default" across
equity and debt listed entities. Currently, Clause A.17 of Part-B of Schedule III,
which pertains to debt listed entities, is suggested to be replaced with Clause A.6
of Part-A, which applies to equity listed entities. This change aims to harmonize the
regulatory language and definitions concerning fraud and default.
b. The working group has proposed reducing the advance notice period for
notifying record dates to stock exchanges from 7 (seven) working days to 3 (three)
working days. This change aligns with the existing requirement for rights issues and
is intended to streamline processes for listed entities.
c. A recommendation is made to mandate that all disclosures by listed entities with
non-convertible securities be filed in XBRL format, similar to the requirements for
equity listed entities. This aims to reduce duplication of effort and enhance the
efficiency of disclosures.
d. The proposal suggests relaxing the ISIN limit for unlisted ISINs that become listed
after December 31, 2023. This change is intended to encourage issuers to list
outstanding unlisted ISINs without impacting the cap on the number of ISINs
allowed.

Public comments on these proposals are invited by September 6, 2024, with detailed
instructions provided for submission through a web-based form.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-measures-towards-ease-of-doing-business-and-streamlining-compliance-
requirements-for-non-convertible-securities-review-of-lodr-regulations_85690.html

22
34. Consultation Paper on review of Regulatory Framework for Investment Advisers and
Research Analysts

The consultation paper on the regulatory framework for Investment Advisers (IAs) and
Research Analysts (RAs) introduces several key changes. Annual compliance audits
for IAs, RAs, and research entities must detail compliance with all relevant regulations
and guidelines. Reports must be completed within 60 (sixty) days of the financial year-
end and submitted to SEBI within specified timeframes. Adverse findings from audits
must be addressed and reported within 1(one) month and compliance certificates
from statutory auditors will be eased and integrated into the audit.

The paper also clarifies the applicability of regulations to trading call providers. Trading
calls given after risk profiling and product suitability assessments fall under IA
Regulations, while those without such assessments are governed by RA Regulations.
Furthermore, it mandates that IAs, RAs, and research entities maintain websites to
publish compliance audit reports. The paper invites public comments on these
proposals latest by August 26, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-review-of-regulatory-framework-for-investment-advisers-and-research-
analysts_85509.html

35. Consultation Paper on Streamlining the process and reduction in timelines of Bonus
Issue (enabling T+2 trading of shares post record date where T being record date)

SEBI's draft circular proposes changes to streamline the bonus issue process, aiming to
reduce the timeline for trading bonus shares. Currently, there are no specific
guidelines for the crediting and trading of bonus shares post-record date, leading to
inconsistencies. The new guidelines suggest that bonus shares should be available for
trading within 2 (two) working days (T+2) after the record date.

Issuers must obtain approval and communicate dates promptly, with bonus shares
credited directly to the existing ISIN and made available for trading by T+2.

Public comments on these proposals are invited latest by August 26, 2024.

Link to the Report:

https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-
on-streamlining-the-process-and-reduction-in-timelines-of-bonus-issue-enabling-t-2-
trading-of-shares-post-record-date-where-t-being-record-date-_85466.html

23
 BSE & NSE UPDATES
36. NSE issued Introduction of additional eligibility criteria for listing on NSE EMERGE

The National Stock Exchange of India (NSE) has announced an update to its listing
criteria for SMEs on the NSE EMERGE platform. The new circular, issued on August 22,
2024, introduces an additional financial criterion for SMEs seeking to list their securities
on the exchange.

Key changes include:

a. SMEs must now demonstrate positive Free Cash Flow to Equity for at least 2 (two)
out of the 3 (three) financial years preceding their application for listing. This new
requirement aims to ensure that listed SMEs have a stable financial position and
can sustain operational and capital needs.
b. The new criterion will apply to all Draft Red Herring Prospectuses (DRHPs) filed on or
after September 1, 2024. This change will remain in effect until further notice.
c. The calculation of FCFE is detailed in the annexure attached to the circular. It
includes components such as cash flow from operations, purchase of fixed assets,
net borrowings, and post-tax interest expenses. The methodology ensures
transparency and consistency in financial assessments.
FCFE Calculation Formula:
FCFE = Cash Flow from Operations – Purchase of Fixed Assets + Net Borrowings –
Interest x (1 - T)
Here, T represents the Effective Tax Rate, calculated as [1 - (PAT/PBT)].

Link to the Circular:

https://nsearchives.nseindia.com/content/circulars/SME63532.pdf

37. Exemption under Rule 19A of Securities Contract (Regulation) Rules. 1957 (Minimum
Public Shareholding for public sector company)

The Ministry of Finance has issued a new order exempting public sector enterprises
from Rule 19A of the Securities Contracts (Regulation) Rules, 1957. According to the
notice dated July 19, 2024, public sector businesses with less than 25% (twenty-five
percent) public shareholding now have until August 1, 2026, to achieve the minimum
public shareholding requirement.

This extension allows listed public sector entities additional time to increase their public
shareholding to the mandated level. All listed companies are advised to review this
exemption and ensure compliance with the revised timeline.

Link to the Circular:

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page
=20240801-51

24
 SIGNIFICANT PRONOUNCEMENTS

1. SEBI bans Reliance Home Finance Limited and 23 other entities for 5 (five) years and
imposes penalty on each entity

In a landmark ruling, SEBI has imposed a significant penalty on Reliance Home Finance
Limited (RHFL) and 23 other entities for their involvement in a fraudulent scheme led
by Mr. Anil Ambani. Each entity was fined INR 25 (twenty-five) crores and were
banned from accessing the securities market for 5 (five) years. This scheme involved
the disbursement of General Purpose Working Capital Loans (GPCL), which led to a
severe erosion of RHFL’s financial health as the loans were ultimately declared non-
performing assets (NPAs).

Notably, SEBI’s findings revealed several deviations from due process in the
disbursement of these loans. The investigation found irregularities in loan approvals,
non-compliance with standard procedures, and the provision of loans to entities with
weak financial standings. Many loans were issued on the same day as the loan
applications, raising concerns about the legitimacy of the transactions.

Some key findings from the investigation include:

a. Loans totalling INR 6,187 (six thousand one hundred and eighty-seven) crore were
disbursed in FY 2018-19, with a significant portion approved hastily without due
diligence.
b. 62 (sixty-two) loans amounting to Rs. 5,552 (five thousand five hundred and fifty-
two) crores were approved the same day the applications were submitted.
c. Deviations were observed in the Credit Approval Memos, highlighting issues like
waiving field investigations, inadequate customer ratings, and missing security
measures.
d. A forensic audit revealed that a significant portion of these loans was used for
circular transactions, evergreening of loans and onward lending to related parties
within the Reliance Group.

Link to the Order:

https://www.sebi.gov.in/enforcement/orders/aug-2024/final-order-in-the-matter-of-
reliance-home-finance-limited_86052.html

2. NFRA imposes monetary penalty of Rs. 10 crores on BSR & Associates LLP and others
for fraudulent diversion of funds by Coffee Day Enterprises Limited

The National Financial Reporting Authority (NFRA) has imposed a record Rs 10 (ten)
crore penalty on KPMG affiliate M/s BSR & Associates LLP, marking the highest penalty
ever imposed by the regulator. Additionally, 2 (two) auditors were barred for alleged
significant professional lapses in the audit of Coffee Day Enterprises for FY 2018-19.

NFRA initiated a suo moto investigation into the professional conduct of the statutory
auditors of Coffee Day Enterprises Limited (CDEL) under Section 132(4) of the
Companies Act 2013, following a SEBI investigation report. The SEBI report highlighted
25
 the diversion of Rs. 3,535 (three thousand and thirty-five) crores from 7 (seven)
subsidiaries of CDEL to Mysore Amalgamated Coffee Estate Limited (MACEL), a
company owned and controlled by CDEL’s promoters. Coffee Day Enterprises is a
publicly listed company. Consequently, a Show Cause Notice was issued to M/s BSR
& Associates LLP, along with CA Aravind Maiya, the engagement partner (EP), and
CA Amit Somani, the engagement quality control reviewer (EQCR), for their role in the
audit.

NFRA’s investigation revealed that the auditors of both the Consolidated and
Standalone Financial Statements for FY 2018-19 failed to comply with key requirements
under the Standards on Auditing (SA), the Standards on Quality Control and various
provisions of the Companies Act. The investigation also uncovered serious professional
lapses and a lack of due diligence in performing the audit.

Link to the Order:

https://cdnbbsr.s3waas.gov.in/s3e2ad76f2326fbc6b56a45a56c59fafdb/uploads/202
4/08/202408191036463933.pdf

3. SEBI informal guidance to Anjani Portland Cement Limited on minimum public

shareholding

Background

Anjani Portland Cement Limited (APCL), a public limited company listed on BSE and
NSE, is planning to amalgamate its unlisted subsidiary, Bhavya Cements Private Limited
(BCPL). APCL holds 99.09% of BCPL’s shares.

Shareholding Pattern:

a. APCL: 75% (seventy-five percent) Promoter (Chettinad Cement Corporation), 25%

(twenty-five percent) Public.
b. BCPL: 99% (ninety-nine percent) Promoter (APCL), 0.91% (ninety-one hundredths
percent) Non-promoter public shareholders.

Amalgamation Proposal:

a. Upon amalgamation, APCL will issue shares to BCPL’s non-promoter public

shareholders.
b. Pre- and post-amalgamation shareholding patterns of APCL show the promoter
holding slightly reducing from 75% (seventy-five percent) to 74% approx. (seventy-
four percent), and public holding increasing from 25% (twenty-five percent) to
25.27% (twenty-five point two seven percent). However, the pre-scheme public
shareholders’ post-scheme shareholding is 24.91% (twenty-four point nine one
percent), below the 25% (twenty-five percent) threshold required by SEBI’s Master
Circular on Scheme of Arrangement.

Queries Raised:

26
a. Whether BCPL’s non-promoter public shareholders can be categorized as public
shareholders post-amalgamation.
b. Whether SEBI’s 25% (twenty-five percent) public shareholding requirement applies
only on the effective date or requires continued compliance.
c. Whether the promoter’s proposed share sale for compliance would fall under the
SEBI (PIT) Regulations' exemptions.

SEBI Observations

a. BCPL’s non-promoter public shareholders cannot be classified as public

shareholders under SEBI regulations since BCPL is a subsidiary of APCL. Any
reclassification would need to follow Regulation 31A of the LODR Regulations.
b. The 25% (twenty-five percent) public shareholding requirement applies
continuously, even post-amalgamation, to ensure compliance with the minimum
public shareholding (MPS) norms.
c. The promoter’s proposed sale of shares to meet the 25% (twenty-five percent)
requirement must comply with SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011.

Any sale of shares by the promoter for compliance may fall under the insider trading
exemption if the promoter is not in possession of unpublished price-sensitive information.

Link to the Guidance note:

https://www.sebi.gov.in/sebi_data/commondocs/aug-
2024/SEBI%20Response%20Letter%20dated%20May%2014%202024%2013.08_p.pdf

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