SEBI proposes to half disclosure time

SEBI proposes to half disclosure time

Subject: Economy

Context:

Securities and Exchange Board of India (Sebi) has amended NCS (Issue and Listing of Non-Convertible Securities) Regulations and in another notification, notified rules reducing the minimum holding requirement of Real Estate Investment Trust (REITs)

Details:

• No person would act as an online bond platform provider without obtaining registration certificate as a stock broker from Sebi.
• A person acting as an online bond platform provider without registration certificate can continue to do so for a period of three months.
  • The move will also enhance the confidence among investors, particularly non-institutional investors, as the platforms would be provided by Sebi-regulated intermediaries.
• Another notification reduced the minimum holding requirement of Real Estate Investment Trust (REITs) units by sponsors to 15 per cent from 25 per cent at present.
  • The sponsor(s) and sponsor group(s) shall collectively hold a minimum of 15 percent of the total units of the REIT for a period of at least three years from the date of listing of such units pursuant to initial offer on a post-issue basis.
• In another notification, the regulator has discontinued a separate regulatory framework for unlisted Infrastructure Investment Trust (InvIT).

Concept:

Online bond platform 

• Sebi has defined online bond platform as any electronic system, other than a recognised stock exchange or an electronic book provider platform, on which the debt securities which are listed or proposed to be listed, are offered and transacted.
• Further, an online bond platform provider means any person operating or providing such a platform.
• Online Bond Platform Providers (OBPPs) would be companies incorporated in India and they should register themselves as stock brokers in the debt segment of the stock exchange
• OBPPs cannot offer products or services on its platform except listed debt securities and debt securities proposed to be listed through a public offering.
• After obtaining registration as a stock broker in the debt segment of a stock exchange, an entity would have to apply to the bourse ( stock market ) to act as an OBPP.
• In its application, the entity will have to ensure that roles and obligations, technology, operating framework — access and participation, Know Your Client (KYC) for on-boarding investors and sellers and risk profiling of investors — are complied with.

Debt securities vs equity:

• Debt securities are financial assets that entitle their owners to a stream of interest payments. Unlike equity securities, debt securities require the borrower to repay the principal borrowed.
• Equity securities indicate ownership in the company whereas debt securities indicate a loan to the company.
• Equity securities do not have a maturity date whereas debt securities typically have a maturity date.
• Equity securities have variable returns in the form of dividends and capital gains whereas debt securities have a predefined return in the form of interest payments.
  • The interest rate for a debt security will depend on the perceived creditworthiness of the borrower.
• Both securities are issued at face value and trade at market value, which may be higher or lower than the face value.
• Equity shareholders are entitled to voting rights whereas debt securities do not hold such rights.
• Treasury bills, commercial paper, bonds such as government bonds, corporate bonds, municipal bonds etc. are common types of debt security. On the other hand, common stocks, common shares, preferred stock are examples of equity securities.