At its board meeting on December 18, the Securities and Exchange Board of India (Sebi) may accept recommendations that will impact angel funds, small and medium-sized businesses (SMEs), and the larger securities market through laws pertaining to initial public offerings (IPOs), insider trading, and compliance for registered firms.
A proposed revision to the regulations regulating SME initial public offerings is one of the most eagerly awaited developments. The minimum application size for these IPOs is probably going to be raised by the regulator from ₹1 lakh to ₹2-4 lakh, which will restrict participation to more knowledgeable investors who are willing to take on greater risk.
A notable change in the market supports Sebi's plan to double the minimum subscription amount. The Nifty50 and Sensex have increased by around 4.5 times since the introduction of its initial framework over 14 years ago. Sebi suggested tightening the requirements for eligibility by requiring companies looking to list to have made at least ₹3 crore in operating profit (earnings before interest and tax) in two of the preceding three fiscal years. Additionally, it recommended requiring that the face value of the issued capital and proposed new shares in initial public offerings (IPOs) be ₹10 each.
Modifications to insider trading regulations
In accordance with the Prohibition of Insider Trading (PIT) Regulations, the board is also anticipated to broaden the definition of unpublished price-sensitive information (UPSI). Restructuring plans, one-time bank settlements, and other business choices that have the potential to significantly impact stock values will fall under this category. Following a study that found that businesses frequently neglect to categorize all pertinent corporate developments as UPSI, resulting in gaps in compliance, Sebi made its proposal.
Its suggestion to amend the UPSI definition and include regulation 30 of the Listing Obligations and Disclosure Requirements (LODR) in its consultation document may be taken into consideration by the regulator. In order to maintain transparency and prompt information distribution to investors, listed businesses are required by Regulation 30 of LODR to report material events or information to the stock exchanges.
Sebi may approve a proposal to implement significant modifications to the regulatory framework guiding angel funds under alternative investment funds (AIFs) in order to promote more structured investments in startups. These include cutting the minimum investment per company from ₹25 lakh to ₹10 lakh, restricting investments to certified investors, and cutting the lock-in period in half from a year to six months.
