SEBI Board Meeting to Review FPI Settlement Reforms, Governance Changes and Transparency Measures

New Delhi, March 22: The Securities and Exchange Board of India (SEBI) is set to hold its board meeting on Monday, with a broad agenda covering foreign portfolio investor (FPI) settlement norms, regulatory reforms for market intermediaries, and measures to enhance transparency within the regulator.

Proposal to Ease FPI Fund Settlement Norms​

A key focus of the meeting will be a proposal to allow FPIs to net funds for same-day cash market trades. Currently, FPIs are required to settle transactions on a gross basis, meaning each purchase must be funded independently of any sale, even if both occur on the same day.

The proposed “netting of funds” mechanism would enable FPIs to offset purchase obligations using proceeds from same-day sales, requiring them to pay only the net amount. This move is aimed at improving operational efficiency and lowering funding costs, particularly during high-volume events such as index rebalancing.

The change is also expected to reduce foreign exchange costs that arise due to timing mismatches between inflows and outflows. The proposal follows concerns that the existing system forces FPIs to arrange additional funds for at least an extra day, increasing transaction expenses.

Review of Governance and Regulatory Frameworks​

Alongside FPI-related reforms, SEBI will review proposals to revamp the “fit and proper person” criteria applicable to market intermediaries. The changes are intended to improve procedural clarity and fairness in regulatory assessments.

One of the proposed revisions includes removing the disqualification triggered by the mere initiation of winding-up proceedings. Instead, only a final winding-up order would be considered while determining eligibility under the criteria.

The regulator is also considering explicitly incorporating the right to a hearing into the rules. While this practice already exists, formal inclusion is expected to eliminate any ambiguity in procedural safeguards.

Ease of Doing Business and Institutional Reforms​

The board will also deliberate on measures aimed at improving ease of doing business for real estate investment trusts and infrastructure investment trusts.

Another major agenda item is the review of a report submitted by a high-level panel on conflict of interest and transparency. The report proposes wide-ranging reforms, including enhanced disclosure requirements and the adoption of a zero tolerance approach to address potential conflicts involving senior SEBI officials.

Leadership Context​

This will be the fifth board meeting chaired by SEBI Chairman Tuhin Kanta Pandey since he assumed office on March 1, 2025. The outcomes of the meeting are expected to shape key regulatory and operational aspects of India’s capital markets.