SEBI outlines new frameworks, introduces silver exchange trade | Explained

The Securities and Exchange Board of India (SEBI) has made a series of changes in frameworks in its board meeting held on Tuesday. The changes include alterations in the framework for gold exchange, social stock exchange and de-listing among others. Here’s all you need to know about the recent changes in SEBI’s frameworks: 

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Framework for Gold Exchange

SEBI approved a plan to establish a gold exchange in which the yellow metal would be exchanged in the form of electronic gold receipts and the market will aid in the establishment of a transparent domestic spot price discovery mechanism. The gold-representing instruments will be known as Electronic Gold Receipts (EGRs) and will be registered as securities.

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Framework for Social Stock Exchange

SEBI authorized the establishment of a Social Stock Exchange as well as its framework. The Social Stock Exchange will be an addition to existing stock exchanges. Non-profit and for-profit social companies with a clear social purpose and effect will be permitted to list on the Social Stock Exchange. These organizations will be able to raise funds from investors through equity, zero-coupon zero principal bonds, mutual funds, social impact funds, and development impact bonds.

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Framework for De-listing

SEBI has accepted a proposal to amend the de-listing mechanism following the open offer. The new approach intends to make M&A transactions for publicly traded firms more reasonable and easy, while also balancing the interests of all investors.

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Framework for Superior Voting Rights Shares

SEBI has agreed to loosen the framework regulating the issuance of shares with superior voting rights (SR shares), which will benefit emerging technology firms. Promoters with a net worth of more than Rs 1,000 crore can have superior voting rights in their firms, up from the existing Rs 500 crore.

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Related Party Transactions

SEBI has toughened the rules for related party trades since such transactions have been used to evade the legal environment, at times, for money siphoning. Any person who possesses, directly or indirectly, more than 20% in the prior year – or 10% or more beginning April 1, 2023 – shall also be deemed a related party.

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Criteria for determining ‘Fit and Proper Person’ 

SEBI has decided to change the criterion for identifying who is a “Fit and Proper Person.” According to a statement issued by Sebi following the board meeting, the principle-based criteria should include integrity, honesty, ethical behavior, repute, fairness, and character.

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Silver Exchange Traded Funds

SEBI has accepted the notion of introducing silver exchange-traded funds (ETFs) in India with certain precautions similar to the existing regulatory system for gold ETFs.

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Investor Charter for Securities Market

SEBI has approved the investor charter suggested in the Union Budget 2021-2022 with the goal of safeguarding investors from financial product misselling. The investor charter will outline capital market investors’ rights and duties, as well as dos and don’ts for investors.