Sebi clears reforms giving more say to investors

India's market regulator on Wednesday agreed to give more power to shareholders and asked large corporations to make clearer disclosures to stock exchanges on market-moving events.

The Securities and Exchange Board of India (Sebi) also gave retail investors greater control over the money they invest by ensuring that funds do not need to stay with stock brokers for a long period of time.

The Sebi is currently conducting an enquiry into the Adani Group, following allegations of stock manipulation and accounting fraud by US short-seller Hindenburg Research. The Adani Group has denied all wrongdoing.

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Sebi chief Madhabi Puri Buch declined to comment on any company specific issue, saying that its intent is "to ensure that the spirit of a law is followed and not just the letter."

The Sebi board is doing away with the current practice of having permanent board members for publicly listed companies, saying in a statement that board seats would come up for voting every five years, making shareholder approval mandatory for any director.

The regulator also said that any special rights granted to a shareholder of a listed entity will need to come up for periodic shareholder approval.

Separately, Sebi approved a Rs 33,000 crore ($4.01 billion) fund to backstop the corporate debt market, which will step in to buy illiquid securities in times of stress.

The markets regulator has asked that the top 100 companies listed on its stock exchanges confirm or deny market rumors that impact share prices, in a bid to bring more transparency and ensure timely disclosure of "material events".

The requirement will kick in from Oct.1, 2023 for top 100 companies by market capitalization, and from April 1, 2024 for the top 250, Sebi said in a press release following a board meeting.

Sebi said that material events or disclosures emerging from a board of directors meeting must be disclosed to exchanges within 30 minutes.

In order to protect retail investors, Sebi put in place a system which allows an investor to block funds in their bank accounts rather than transferring them upfront to brokers before executing secondary market trades.

A similar system is in place for initial public offerings and will prevent misuse of client funds, brokers' defaults and the consequent risk to investors' capital.

Other changes announced by the Sebi include allowing private equity funds to be the main shareholders in an asset management company which runs a mutual fund.

The regulator also prescribed more disclosures around environment, social and governance (ESG) issues for companies and mutual funds investing based on those metrics.

It has mandated that 65 per cent of assets of ESG focused mutual fund schemes should be in companies which make comprehensive related disclosures.

($1 = 82.1500 Indian rupees)