The Securities and Exchange Board of India (Sebi) and the Pension Fund Regulatory Development Authority of India (PFRDA) have made several critical regulatory changes for the capital market and the pension sector in the public's interest over the past month.
Among the changes Sebi introduced include new rules for private equity funds sponsoring mutual fund houses and eligibility of the self-sponsored AMCs for sponsorship.
Facilitating New Sponsors
Any entity owning 40 per cent or more stakes in a mutual fund would be considered a sponsor. Also, sponsorship applicants must have at least five years of experience as a fund manager, with familiarity in "investing and managing" at least Rs. 5,000 crore worth of assets.
Besides, a private equity-sponsored mutual fund cannot be an anchor investor in public issues of investee companies where the sponsor has a 10 per cent or more stake or board representation.
Sebi has also made it mandatory for a five-year lock-in for an initial shareholding of the sponsor in an AMC, extendable if sponsorship is transferred to another entity within the private equity group. The private equity's eligibility for sponsorship will depend on its 'conduct'.
The rule changes are expected to expand the mutual fund industry, facilitate new sponsors, boost capital flows, innovation, competition, consolidation, and easier exits for the existing sponsors.
Transparency
To increase transparency, the regulator has asked the credit rating agencies (CRAs) to periodically review the published ratings during the lifetime of the securities. If a client doesn't cooperate with them, they can carry out the evaluation based on the available resources.
It is expected to enhance transparency and information regarding non-cooperative issuers in the interest of various market participants and investors.
Sebi has also made it mandatory for the Environmental, Social and Governance (ESG) schemes to invest at least 65 per cent of their assets under management (AUM) in companies having exposure to Business Responsibility and Sustainability Reporting (BRSR).
Consequently, the ESG schemes will have to invest at least 65 per cent of their AUM in companies reporting on BRSR disclosures, effective October 1, 2024, ensuring that ESG schemes can invest only in companies with comprehensive BRSR disclosures.
Pension Rules
PFRDA has also announced new guidelines on the pension front. It proposed changes to the Point-of-Presence Regulations 2018 regarding the digitisation and maintenance of subscriber records by PoPs and central record-keeping agencies (CRAs), simplifying eligibility criteria, reducing the application processing time and number of PoPs, etc.
Sebi has sought public comments on the changes aimed at encouraging an effective distribution channel for the National Pension System (NPS) and other schemes under the PFRDA Act, 2013, and ensuring fair, efficient and transparent practices of PoPs towards old age income security.
For the ease of civil servants, PFRDA has extended the deadline to November 30 for choosing between the Old Pension Scheme (OPS) and NPS. This one-time option comes after representations from the All India Service (AIS) members, comprising officers of the Indian Administrative Service (IAS), Indian Police Service (IPS), and Indian Forest Service (IFS).
Those still undecided over whether to choose OPS or NPS can do so by the new deadline.
