SEBI Board Set to Greenlight Market Efficiency Boosts: Open-Market Buybacks and Fast-Track AIF Clearance on Agenda
The Securities and Exchange Board of India (SEBI) board is scheduled to convene this Friday for a critical meeting aimed at boosting overall market efficiency. The agenda includes significant proposals concerning open-market share buybacks, streamlining the launch process for Alternative Investment Funds (AIFs), and relaxing operational constraints for mutual funds.These measures are designed to address regulatory bottlenecks and enhance liquidity within capital markets. These decisions mark part of a broader effort by SEBI to modernize industry practices across various financial instruments.
Rethinking Open-Market Share Buybacks
A major proposal before the board is the reintroduction of open-market share buybacks through stock exchanges, accompanied by tightened execution timelines. The regulator has proposed substantial changes to the process duration.Under the new framework, companies would be required to complete open market buybacks within 66 working days from the offer opening date. This significantly shortens the previous maximum period of up to six months.
SEBI's proposal retains the requirement that issuers must utilize at least 40 per cent of the earmarked buyback amount during the first half of the entire offer period.
Accelerating AIF Fund Launches with GARUDA
To speed up the capital formation process for Alternative Investment Funds (AIFs), SEBI plans to consider a new green-channel mechanism known as GARUDA. This mechanism is intended to streamline the processing of placement memorandums or PPMs filed with the regulator.The implementation of GARUDA would allow AIFs to commence fundraising within 10 working days of filing their PPM. This represents a major reduction compared to the current mandated 30-day waiting period.
GARUDA aims to ease the operational difficulties faced by AIFs, ensuring faster deployment and management of investment funds.
Easing Operations for Mutual Fund Managers
The board is also expected to deliberate on a proposal that would significantly relax intraday borrowing rules for mutual fund schemes. This measure addresses critical timing mismatches between cash inflows and outflows experienced by Asset Management Companies (AMCs).Currently, intraday borrowing is an essential tool for AMC’s cash flow management. It assists fund managers in meeting redemption payouts and other settlement requirements efficiently.
The proposed changes would allow AMCs to avail these borrowings beyond just unitholder redemptions. Funds could utilize intraday lines for forex settlements, trade settlements, mark-to-market payments on derivative positions, and pay-in obligations for trades.
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