Sebi’s Board Meeting Scheduled for June 18 to Consider Key Market Reforms

Critical Regulatory Reforms Likely to Be Taken Up for Approval

The Securities and Exchange Board of India (Sebi) has scheduled a key board meeting on June 18, 2025, where it is expected to deliberate on multiple critical proposals aimed at easing compliance burdens and streamlining capital markets. Many of these proposals have been floated for public consultation over the past few months, and industry stakeholders are watching closely as the regulator prepares to finalize them.

Among the most prominent items on the agenda is the potential recognition of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as equity instruments, a move that could pave the way for their inclusion in equity indices and further increase mutual fund allocations into these instruments.

Highlights:

• Sebi board meeting scheduled for June 18, 2025.

• Recognition of REITs and InvITs as equity among key agenda items.

• Several proposals under final review following public consultation.

REIT and InvIT Reforms: Equity Treatment, MF Investment Cap Increase

The board is expected to weigh the long-pending industry demand to classify REITs and InvITs as equity, a shift that could lead to increased institutional participation. Mutual funds, in particular, could be allowed to allocate up to 20% of NAV from equity schemes into REITs and InvITs, doubling the current limit. For debt schemes, the cap would remain at 10%.

Additionally, Sebi is proposing regulatory clarifications for REITs and InvITs, including:

• A clearer definition of ‘public’ for minimum unit holding requirements.

• Adjustments in cash flow assessments where holding entities offset negative flows with distributions from SPVs.

• Timeline alignment for quarterly report submissions.

Highlights:

• Equity MF exposure to REITs/InvITs may rise from 10% to 20%.

• Definition of ‘public’, cash flow calculations, and reporting timelines to be clarified.

• Industry welcomes move for better index representation.

Simplification of QIP Documentation and FPIs in Government Bonds

To reduce red tape in capital raising, Sebi may approve a streamlined documentation process for Qualified Institutional Placements (QIPs). Currently, QIP issuers must file detailed documents, increasing the time and paperwork required. The new proposal will require filing only relevant material information, easing the compliance burden for companies.

Sebi is also reviewing a proposal to simplify registration and compliance obligations for Foreign Portfolio Investors (FPIs) that invest exclusively in Indian Government Bonds (IGBs). These instruments are considered low-risk and the move is expected to enhance sovereign debt inflows. Public feedback on this proposal remains open until June 3.

Highlights:

• QIP issuers may benefit from simplified documentation rules.

• FPIs investing in IGBs may see reduced compliance obligations.

• Focus on reducing barriers for stable capital flows into India.

AIF Co-Investment Framework and Advisory Flexibility

Sebi’s board may also discuss expanding flexibility for Alternative Investment Funds (AIFs) by formalizing co-investment opportunities via a separate Co-Investment Vehicle (CIV). This structure would allow certain AIF investors to increase stakes in underlying portfolio companies.

Additionally, the board may consider allowing AIF managers to offer investment advice to investors even in cases where the fund has no direct exposure to the listed securities in question. This shift could significantly broaden the advisory scope within the AIF ecosystem.

Highlights:

• AIFs may be permitted to offer co-investment via separate CIV schemes.

• Managers could gain flexibility to advise investors beyond current portfolio scope.

• Reforms aimed at enhancing participation and transparency in AIFs.

Pending Issues: NSEL Broker Settlement, PSU Delisting Framework

Among legacy matters, Sebi may greenlight a settlement scheme for commodity brokers involved in the National Spot Exchange Ltd (NSEL) case. Over 300 showcause notices were issued, and appellate body SAT has urged Sebi to explore resolution under consent regulations. Many brokers, previously declared unfit as intermediaries, had contested Sebi’s order.

Sebi is also reviewing a separate delisting framework for PSUs, aimed at voluntary exits for government companies with low public float and poor market performance. The proposal suggests a fixed exit price at a 15% premium over floor price, with the possibility to bypass the usual two-thirds public shareholder approval requirement if the government and promoter holding is already at 90%.

Highlights:

• NSEL case: Board may approve settlement mechanism for implicated brokers.

• PSU delisting: Fixed premium exit price, reduced shareholder approval hurdles proposed.

• Framework intended to ease delisting of inefficient or underperforming PSUs.

Clearing Corporation Demerger and Operational Memos

The demerger of clearing corporations from exchanges also remains on the table. Sebi has proposed making clearing corporations independent to avoid future capital infusion obligations by exchanges. However, exchanges are resisting the proposal, citing concerns over financial sustainability if demerged entities are not also made independently capitalized.

While many of the proposals require regulatory amendments, some operational and procedural matters — although not requiring board approval — may also be presented through the information memorandum for board acknowledgment.

Highlights:

• Clearing corporation demerger pending; exchanges oppose due to financial concerns.

• Some operational issues may be placed before board without need for formal approval.

• Meeting seen as pivotal for capital market structure and governance reforms.