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Context:

• The Securities and Exchange Board of India (SEBI) recently announced several regulatory changes aimed at enhancing market integrity, investor protection, and operational efficiency.
• These reforms, discussed during a board meeting, span across various aspects of market participation and governance.

READ ABOUT FINFLUENCERS: https://www.iasgyan.in/daily-current-affairs/finfluencers-18

Key Regulatory Changes

Restriction on Partnerships with Finfluencers

• Objective: SEBI has barred registered advisors from entering into partnerships with unregistered influencers, often referred to as finfluencers, who make claims regarding investment returns.
• Rationale: This measure aims to safeguard investors from potentially misleading information and ensure that regulated entities maintain a clear distinction from unregulated entities in providing financial advice.

Strengthening Criteria for F&O Market Eligibility

• Criteria: Stocks intending to participate in the Futures and Options (F&O) market must now meet stringent eligibility criteria.
• Stocks must rank within the top 500 based on average daily market and traded value over the last six months.
• Additional requirements include a median order size of at least Rs 75 lakh and a market-wide position limit of Rs 1,500 crore.
• The stock should also demonstrate an average daily delivery value in the cash market exceeding Rs 35 crore.
• Purpose: These criteria are designed to reduce risk and ensure that only sufficiently liquid and actively traded stocks participate in the derivatives market, thereby enhancing market efficiency and stability.

Reforms in Delisting Procedures

• Delisting Process: SEBI has introduced a fixed-price method as an alternative to the existing reverse book building process for delisting offers.
• Minimum Premium Requirement: A minimum premium of 15% over the floor price has been mandated for delisting offers.
• Lowering Counteroffer Threshold: The threshold for counteroffers has been reduced to 75%, provided that at least half of the public shareholders tender their shares.
• Objective: These reforms aim to streamline the delisting process, making it more investor-friendly while ensuring fair valuation and adequate shareholder participation in such corporate actions.

Introduction of 'Adjusted Book Value'

• Expanded Application: SEBI has expanded the application of 'adjusted book value' as a metric to determine the minimum price for stocks.
• Previous Scope: Initially used for illiquid stocks, this metric will now also apply to liquid stocks.
• Purpose: By incorporating adjusted book value, SEBI aims to ensure that stock prices reflect a fair valuation that considers the financial health and market dynamics, benefiting both investors and companies.

Conclusion

• SEBI's recent regulatory reforms mark a significant step towards strengthening India's financial markets.
• These measures not only aim to protect investors from misleading information but also seek to enhance market efficiency, transparency, and investor participation in corporate actions like delisting.
• As these reforms come into effect, their impact on market dynamics and investor sentiment will be closely observed across the financial sector.

READ ABOUT SEBI: https://www.iasgyan.in/daily-current-affairs/securities-and-exchange-board-of-india-sebi

PRACTICE QUESTION Q. Discuss the role of 'finfluencers' in the context of investment advice and the regulatory concerns associated with their activities. How do their engagements with registered advisors impact investor protection and market integrity? What measures should regulatory bodies like SEBI undertake to address these concerns effectively? Discuss with suitable examples.

SOURCE: TOI