Current Affairs-Topics

SEBI's New Framework: Major Reforms in Securitisation Market

SEBI has introduced major reforms in the securitisation market, including investment thresholds, participation rules, risk management, liquidity facilities, eligibility requirements, and track record requirements.

Investment Thresholds and Participation Rules

  • SEBI (Securities and Exchange Board of India) minimum investment "ticket size" set at Rs 1 crore
  • Private placements capped  at 200 invest  ors
  • Public offers must remain open for 3-10 days
  • Mandatory dematerialisation of all securitised debt instruments
  • Targeted at high-net-worth and institutional investors
  • Public offer advertising guidelines aligned with non-convertible securities
  • All transactions to be conducted electronically
  • Enhanced transparency and reduced fraud risk through demat form

Risk Management and Asset Quality

  • Originators must retain 10% of securitised pool
  • Reduced to 5% for assets with 24-month maturity
  • Minimum holding period requirement for underlying assets
  • Optional clean-up call feature for up to 10% asset repurchase
  • Mandatory liquidity facilities for cash flow management
  • Single-asset securitisation not permitted
  • Diversification requirements for asset pools
  • Third-party liquidity support options available

Eligibility and Track Record Requirements

  • Originators must have 3 years operational experience
  • Trade receivables require two cycles of default-free payments

Eligible assets limited to:

    • Listed debt securities
    • Accepted trade receivables
    • Rental incomes
    • Equipment leases
  • Strict qualification criteria for originators and obligors
  • Focus on established market participants
  • Enhanced due diligence requirements

New Mutual Fund Regulations (Effective Nov 2024)

  • Insider trading regulations extended to mutual funds
  • Restrictions on senior AMC employees' trading
  • Enhanced scope for "connected persons" including:
    • Board members
    • Sponsors
    • Trustees
    • Auditors
    • Legal advisors
    • Bankers
    • Consultants
  • Mandatory institutional mechanisms for AMCs
  • Whistle-blower protection policy implementation
  • UPI requirement for investments up to ₹5 lakh
  • Reduced minimum subscription period from three to two working days
  • Streamlined public comment period for draft offers

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