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The Securities and Exchange Board of India (SEBI) serves as the primary regulatory body overseeing 含羞草社区 securities markets. Formed in 1988, the SEBI’s main objectives are to protect the interests of investors (particularly retail investors), ensure the integrity of market operations, and foster the development of the securities market in India.

Its jurisdiction spans the regulation of stock exchanges, mutual funds, market intermediaries, fund raisings, insider laws and market manipulation, and corporate governance practices. Additionally, the SEBI plays a crucial role in investigating and acting against market manipulation, fraudulent activities and other malpractices.

SEBI regulations

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR). The ICDR regulations were introduced to streamline and standardise the issuance of securities, ensuring a well-regulated, transparent and efficient market for companies seeking capital and investors looking for reliable investment opportunities. These regulations provide a structure for companies to follow when offering securities to the public, encompassing IPOs, follow-on offerings, rights issues, qualified institutional placements (QIPs) and other forms of capital raising.

An IPO refers to the process by which a private company offers its shares to the public for the first time in order to raise capital from a wide range of investors. It marks the transition of a company from being privately held to publicly listed, enabling it to access the broader equity market for funding. Under the ICDR, there are several key guidelines that must be followed for a company to successfully launch an IPO:

• Eligibility criteria. A company must meet financial and governance standards, with at least three years of existence and stable financial performance;
• Disclosure requirements. Detailed information in the offer documents including financials, business performance, risk factors and management details;
• Pricing. Priced through fixed price or book-building, with clear floor and cap price in book-building;
• Minimum public offer & allocation. A minimum 25% of shares must be offered to the public (minimum public shareholding, or MPS), with a specific allocation for QIBs, retail, and non-institutional investors. While the law does provide for a lower minimum issue size based on the post-issue market capitalisation of significantly sized companies worth between INR16 billion and INR40 billion (USD182 and USD455 million), even these companies offering between 10% and 25% of the issue shall have their promoters dilute their stake to raise the MPS to 25% within a period of three years;
• Underwriting & listing. An IPO must be underwritten by merchant bankers, and shares must be listed on at least one recognised stock exchange; and
• Minimum subscription. An IPO must meet a minimum subscription level; otherwise, it may be withdrawn or refunded.

SEBI has recently introduced a series of significant changes in relation to initial public offerings in India. Notable amendments to the mainboard IPO framework include the voluntary disclosure of proforma financials for acquisitions or divestments below materiality thresholds, the introduction of disclosure requirements for outstanding stock appreciation rights (SARs), and mandatory disclosure of criminal litigation and regulatory actions involving key managerial personnel and senior management to enhance transparency. It should be noted that issuers were not restricted from undertaking SAR schemes even prior to the change. However, the disclosure requirements and other substantial provisions specifically related to SARs were missing from the guidelines and the market was treating SARs in the same manner as outstanding stock options under the relevant listing laws. Additionally, significant changes also include the requirement to report pre-IPO transactions to stock exchanges within 24 hours and new disclosure obligations related to material agreements.

For listed entities, the provisions of a rights issue are governed by chapter III of the ICDR regulations. These regulations outline requirements such as disclosure requirements, filing of the letter of offer and the overall procedure. SEBI has only recently overhauled the entire rights issue framework with an attempt to simplifying the process. One of the most significant amendments is the removal of the distinction between disclosures under part B and part B-1 of schedule VI of the ICDR regulations. Issuers will now be uniformly required to make disclosures in the draft letter of offer (DLOO) and letter of offer (LOO) as per the new Part B to Schedule VI of the ICDR regulations, which prescribes simplified disclosure requirements.

It should be noted that prior to the change, the simplified disclosure requirements were allowed only upon the issuer meeting certain parameters else a more significant disclosure regime was prescribed. Additionally, the requirement to appoint lead managers (merchant bankers) for rights issues has been completely eliminated. As a result, the entire responsibility for preparing the DLOO and LOO, along with conducting due diligence, now rests with the issuer. Another notable introduction is the concept of “specific investors,” who will now be permitted to subscribe to (a) rights entitlements renounced by promoters and the promoter group and/or (b) unsubscribed portions in case of under-subscription (in accordance with the waterfall mechanism set out under the ICDR regulations). This shall allow issuers and promoters to have more strategic capital allocation- as long as this intention to onboard specific investors has been disclosed in the issue advertisement prepared in connection with the rights offering.

A QIP is a fast-track mechanism for listed companies to raise capital from institutional investors without the need for a public offering, and by way of a private placement, while still ensuring investor protection and market transparency. QIPs also entail multiple obligations, including but not limited to mandating only qualified institutional buyers being eligible to participate. Another key criterion includes pricing based on a two-week average market price. Issuers must disclose material information, use funds as specified, and comply with the listing requirements.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR). These regulations were established to unify and strengthen the regulatory framework for listed companies in India, ensuring greater transparency, accountability and corporate governance by way of timely disclosure of financial results, material events and corporate actions, maintaining minimum public shareholding, appointing independent directors, forming audit committees, and adhering to corporate governance standards. SEBI has recently introduced certain amendments to the LODR that are noteworthy to mention. One of the significant changes that has been brought about is the introduction of a separate chapter on “Corporate Governance Norms for a Listed Entity which has listed its Non-Convertible Debt Securities”. This chapter aims to strengthen the regulatory framework for listed entities in India, particularly those with high debt exposure. The new chapter applies to companies with outstanding debt (non-convertible debt) of INR10,000 million or more, allowing SEBI to focus on entities that pose the greatest systemic risk. Further, these amendments are pushing for a more rigorous and aggressive “assessment” and not just mere “assurance” of Business Responsibility and Sustainability Reporting (BRSR) standards to ensure the companies do not just carry out tick-the-box compliance with such reporting but continually validate their sustainability practices.

SEBI’s latest amendments also tighten the regulatory framework for related party transactions (RPTs) in SME-listed entities, driven by recent instances of regulatory non-compliance and alleged fraud by SME listed companies. While SME-listed entities are generally not subject to the corporate governance (CG) norms applicable to main board companies (unless their paid-up capital exceeds INR100 million or net worth surpasses INR250 million), SEBI has now extended RPT compliance requirements to a wider set of SME-listed entities. This move aims to plug regulatory loopholes and prevent misuse of corporate structures for fund diversion to related parties. SEBI has also introduced a stricter materiality threshold for RPTs, now defined as the lower of INR50 million or 10% of annual consolidated turnover (based on the last audited financials). Further, for high value debt listed companies, even the debenture trustee and (material) debenture holders’ consent shall be required prior to undertaking material RPTs.

SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT). The PIT regulations act as a robust safeguard, ensuring that no individual can gain an unfair advantage from confidential, non-public data. By defining insider trading and setting stringent guidelines, the regulations aim to preserve the integrity of the market, preventing insiders – from directors to employees, consultants and even family members – from using unpublished price sensitive information (UPSI) for personal gain.

The framework requires listed entities to establish a code of conduct ensuring they uphold ethical standards. It also mandates the timely disclosure of trades by designated individuals – especially the “Personnel perpetually in possession of the UPSI”, guaranteeing transparency in any transactions involving insider information.

Under the PIT regulations, personnel who are “perpetually in possession of information” are those individuals who, due to their roles within the company, are privy to information that could influence the stock price – typically senior management, executives or other key decision makers. These individuals must create a trading plan, detailing the trades they intend to make in the future.

SEBI, on 11 March 11 notified amendments to the PIT regulations, expanding the scope of UPSI and introducing flexibilities regarding information emanating from outside the company. New events such as, fund-raising proposed to be undertaken; any agreements which may impact the management or control of the company; granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals; among others, have been added to the UPSI definition. Furthermore, the amendment introduces greater flexibility in handling UPSI originating outside the company and its entry into the structured digital database (SDD). Earlier, the information should have been logged as soon as a designated person comes into possession of UPSI or shares it. Post the amendment, SEBI has mandated that any UPSI received from external sources be entered into the SDD within two calendar days from the date of receipt.

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST). These regulations play a pivotal role in overseeing control and ownership changes in listed companies, safeguarding the interests of all stakeholders and ensuring that both direct and indirect acquisitions are conducted transparently and fairly. Direct control involves acquiring a significant portion of shares or voting rights, while indirect control refers to situations where control is exercised through entities connected to the company.

Under the SAST regulations, any acquisition leading to 25% or more of a company’s voting rights (and thereafter 5% per financial year), or any acquisition of control, be it direct or indirect, necessitates a mandatory tender offer to minority shareholders for a minimum of 26% of the fully diluted capital of the target company. This provision acts as a critical safeguard for minority interests, offering them the opportunity to exit at a fair price if desired.

SEBI (Alternative Investment Funds) Regulations, 2012 (AIF). These regulations were established to bring structure to 含羞草社区 rapidly growing alternative investment sector, offering a comprehensive framework for funds that operate outside traditional investment avenues such as stocks, bonds and mutual funds.

AIFs aggregate capital from sophisticated investors, including high-net-worth individuals and institutions, to invest across diverse asset classes such as startups, real estate, private equity and hedge funds. These funds are classified into three categories under the AIF regulations, based on their investment strategies, risk profiles and objectives. This structured categorisation ensures that each fund type adheres to specific regulatory norms designed to protect investors, foster innovation and promote growth in 含羞草社区 alternative investment ecosystem.

These funds, based on their investment strategies, risk profiles and objectives, are classified into: category I, which typically focuses on socially or economically beneficial sectors like startups and infrastructure; category II investments in more complex areas like private equity and debt; and category III, which engage in high-risk strategies, including hedge fund activities.

SEBI (Underwriters) Regulations, 1993. These regulations govern the functioning of underwriters in India who must obtain registration and meet specific requirements such as having sufficient infrastructure, expertise and financial stability. They are bound by a strict code of conduct, which emphasises fair dealings, transparency and avoiding conflicts of interest. Underwriters are also mandated to keep accurate records, share all relevant information with clients and stay updated with the SEBI’s rules and updates.

SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003. These regulations prevent market manipulation and ensure fair trading practices in the securities market. These regulations aim to protect investors and maintain the integrity of the market by prohibiting fraudulent, deceptive and unfair trading practices.

SEBI initiatives and challenges

The SEBI is actively modernising 含羞草社区 financial markets to enhance resilience and attract investors. It is promoting ESG investing by mandating business responsibility and sustainability reporting for listed companies and encouraging green bonds.

By embracing digital innovations like AI, blockchain and e-KYC (know your customer), the SEBI is improving transparency and streamlining operations. The regulator is also simplifying processes for retail investors, such as implementing faster settlement cycles like T+1, and expanding its reach to include new asset classes like REITs, InvITs, and exploring frameworks for cryptocurrencies.

Despite regulatory challenges, the SEBI’s proactive approach strengthens market integrity and investor confidence, and supports the growth of 含羞草社区 capital markets.