In view of the rising concerns around the spread of novel corona virus disease (Covid-19) and the nationwide lockdown imposed by the Central Government, the Securities and Exchange Board of India (SEBI) had provided certain relaxations to market infrastructure institutions, listed companies, market intermediaries and others, with respect to compliance with various provisions under the securities laws. This has been done through the issuance of various circulars by SEBI. The said circulars are compiled under the following heads:
- Listed Entities and its shareholders
SEBI has granted various relaxations to listed entities from compliance with provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations”) which are enumerated hereinbelow:
a. Relaxation in compliance with LODR Regulations
Vide circulars dated March 19, 2020 and March 26, 2020, SEBI has extended the timeline for various mandatory filings under the LODR Regulations. Due date for the filing of certificate on share transfer facility, certificate from practicing Company Secretary on timely issuance of share certificates, secretarial compliance report, corporate governance report, and holding of AGM by top 100 listed entities has been extended by 1 month; due date for the filing of statement of investor complaints and shareholding pattern has been extended by 3 weeks; and due dates for filing of quarterly and annual financial results have been extended by 45 days and 1 month, respectively.
Relaxation has been accorded to holding of meetings by listed entities as well. For the meetings held in the period between December 01, 2019 and June 30, 2020, the board of directors and the audit committee of a listed company have been exempted from the requirement that there should not be a gap of more than 120 days between two of their meetings. Further, the due date for compliance with the requirement of meeting at least once a year by the nomination and remuneration committee, the stakeholders relationship committee, and the risk management committee has been extended by 3 months.
In further relief to listed entities, SEBI has stated that the SEBI circular dated January 22, 2020 on Standard Operating Procedure on imposition of fines and other enforcement actions for non-compliance with provisions of the LODR Regulations shall come into force for compliance periods ending after June 30, 2020, instead of March 31, 2020. Further, till May 15, 2020, SEBI has exempted listed entities from publication of advertisements in newspapers for information such as notice of board meetings, financial results etc., as required under Regulation 47 of the LODR Regulations.
In terms of various SEBI circulars, entities which intend to list their Non-Convertible Debentures (“NCDs”), Non-Convertible Redeemable Preference Shares (“NCRPS”), or Commercial Papers (“CPs”) are required to provide their audited financial statements not older than 6 months. Relaxing this requirement by 60 days, vide circular dated March 23, 2020, SEBI has stated that the audited financial statements as on September 30, 2019 can be used for issuances up to May 31, 2020, instead of up to March 31, 2020.
Further, by way of the March 23, 2020 circular, SEBI has also extended the timelines for filings relating to debt securities as provided under the LODR Regulations and various circulars. The due dates for filing of half-yearly and annual financial results for entities which had issued NCRPS, NCDs, and CPs have been extended by 45 days and 30 days, respectively. In 2018, SEBI had mandated that large corporates are required to meet one-fourth of their financing needs by way of issuance of debt securities. The initial and annual disclosures with respect to this requirement has been relaxed for 60 days and 45 days, respectively.
b. Relaxation in compliance with SAST Regulations
In terms of Regulations 30(1), 30(2) and 31(4) of the SAST Regulations, certain shareholders of listed entities are required to disseminate information of their consolidated shareholding as on March 31, 2020 to the listed entity and stock exchanges by April 15, 2020. By way of circular dated March 27, 2020, this due date has been extended till June 01, 2020.
- Municipalities
By way of circular dated March 23, 2020, SEBI has also provided relaxation to issuer municipalities from compliance with certain provisions of the SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015. The due date for filing of investor grievance report and accounts maintained by the issuer has been extended by 45 days. Further, the due date for filing of financial results has been extended by 30 days.
- REITs and InvITs
Recognising the need for temporary relaxations in compliance requirements for Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”), vide circular dated March 23, 2020, SEBI has decided to extend the due date for regulatory filings and compliances for REITs and InvITs for the period ending March 31, 2020 by one month over and above the timelines prescribed under the SEBI (Infrastructure Investment Trusts) Regulations, 2014, and the SEBI (Real Estate Investment Trusts) Regulations, 2014, and the various circulars issued thereunder.
- Mutual Funds
Asset Management Companies (“AMCs”) are required to launch new schemes within 6 months from the date of issuance of final observations by SEBI on the Scheme Information Document (“SID”). If the AMC intends to launch the scheme at a date later than 6 months, then it has to refile the SID with SEBI along with filing fees.
In order to provide a relaxation to the AMCs from this deadline in light of the Covid-19 pandemic, by way of circular dated March 23, 2020, SEBI has extended the validity period of its observation letter from 6 months to 1 year. In addition to this, SEBI has also extended the timelines for certain disclosures and the effective date of implementation of certain policy initiatives. The due dates for half-yearly disclosures of unaudited financial results, disclosure of commission paid to distributors, and yearly disclosure of investor complaints with respect to mutual funds, have been extended by 1 month. Further, AMCs were required to implement certain policy initiatives provided under various SEBI circulars dated September 20, 2019, September 24, 2019, and October 01, 2019, with effect from April 01, 2020. This due date has now been extended to May 01, 2020.
In addition to the above, SEBI has also relaxed the requirement of strict access control, such as call recording of deals, etc., applicable for AMCs’ dealing rooms; thus, allowing the dealers to continue operations from offsite. However, this is subject to implementation of appropriate checks and balances, including electronic confirmation by way of email or such other system having audit trail.
In December 2019, SEBI had introduced a Stewardship Code for Mutual funds and Alternative Investment Funds (“AIFs”) in relation to their investment in listed equities, which was supposed to come into effect on April 01, 2020. However, in light of the Covid-19 pandemic, vide circular dated March 30, 2020, SEBI has decided to extend the implementation of the Stewardship Code to July 01, 2020.
- Alternative Investment Funds and Venture Capital Funds
In terms of the SEBI (Alternative Investment Funds) Regulations, 2012 and SEBI (Venture Capital Funds) Regulations, 1996, AIFs and Venture Capital Funds (“VCFs”) are required to do periodic regulatory filings. In light of the Covid-19 pandemic, by way of circular dated March 30, 2020, SEBI has extended the deadlines for the regulatory filings for the periods ending on March 31, 2020 and April 30, 2020, by 2 months.Further, as hereinabove mentioned, the date of implementation of the Stewardship Code for AIFs has been extended to July 01, 2020.
- Portfolio Managers
In line with the relaxation granted to AIFs and VCFs, SEBI has also granted relaxation in timelines to portfolio managers with respect to compliance with certain requirements. By way of circular dated March 30, 2020, SEBI has extended the timeline for the following by 2 months – a. Monthly reporting to SEBI for periods ending March 31, 2020 and April 30, 2020; and b. Applicability of SEBI circular dated February 13, 2020 on ‘Guidelines for Portfolio Managers’.
- Foreign Portfolio Investors and Designated Depository Participants
In terms of the operational guidelines for Foreign Portfolio Investors (“FPIs”) and Designated Depository Participants (“DDPs”) issued by SEBI, an FPI applicant is required to submit duly signed application with supporting documents. Further, the FPI is required to submit the original documents along with copies of KYC documents for verification. Recognising the probable difficulties faced by FPIs in submitting the original documents on account of the Covid-19 pandemic, SEBI has allowed for a temporary relaxation in compliance with this requirement till June 30, 2020. By way of circular dated March 30, 2020, SEBI has allowed DDPs and Custodians to process requests for registration/continuance/KYC etc., on the basis of scanned documents received from:
- E-mail IDs of their global custodians / existing clients whose details have been captured in the records; or
- E-mail IDs of new clients received from duly encrypted domains / are password protected.
Within 30 days post the period of temporary relaxation, i.e. by July 30, 2020, DDPs and Custodians are required to obtain the original and/or certified documents (as applicable normally). If the said documents are not obtained by the said deadline, any fresh purchase will be blocked for such FPIs. DDPs and Custodians are required to report to SEBI for appropriate action in cases where the documents have not been received even after three months post the period of relaxation.
- Credit Rating Agencies
At present, the Credit Rating Agencies (“CRAs”) recognise default based on guidance issued by SEBI by way of various circulars. On March 27, 2020, RBI allowed a moratorium of 3 months on loan servicing, working capital facilities, etc., in light of the hurdles caused by Covid-19 pandemic. In accordance with this, vide circular dated March 30, 2020, SEBI has directed CRAs to assess whether any delay in payment of interest/principal occurred solely on account of the lockdown conditions in the country and if so, to not recognise the same as a default. The circular also stated that any rescheduling in payment of debt obligations by the issuer prior to the due date, with the approval of investors/lenders, will also not be recognised as a default event. This relaxation is applicable till the period of moratorium allowed by RBI.
In addition to the above relaxation, it is stated in the abovementioned circular that a relaxation is granted in the timelines for rating action/issue of press release stipulated under SEBI circular dated June 30, 2017. Encouraging CRAs to endeavour to finish the exercise with their best efforts, SEBI has stated that such cases have to be ratified by the Ratings Sub-Committee of the Board of the CRA. Further, for the period ended March 2020, SEBI has allowed CRAs an extension of 30 days for making semi-annual and annual disclosures on their websites.
- Trading Members and Clearing Members
Trading Members and Clearing Members of stock exchanges and clearing corporations, respectively, are required to fulfil regulatory filings and abide by compliance requirements imposed by various circulars issued by SEBI. Vide circular dated April 16, 2020, SEBI has extended the due dates for the following such filings and requirements:
a. Due dates for client funding reporting and reporting for artificial intelligence and machine learning applications have been extended to May 31, 2020.
b. Due dates for compliance certificate for margin trading for CM segment, risk based supervision, internal audit for half-year ending March 31, 2020, net-worth certificate in margin trading for CM segment and for all members for half-year ending March 31, 2020, have been extended to June 30, 2020.
c. Due dates for system audit report, both algo and otherwise, have been extended to July 31, 2020.
In addition to the above, SEBI has also granted relaxation in maintaining call recordings of orders/instructions received from clients from March 23, 2020 till May 17, 2020. Further, the penalty for non-collection/short collection of upfront margins in cash segment in terms of the circular dated November 19, 2019 shall be effective from May 17, 2020, instead of April 01, 2020. SEBI has also extended the above-mentioned relaxations, wherever applicable, to the Trading Members and Clearing Members in IFSC.
- General Relaxations
a. UPI payments for public issuesSEBI had introduced the use of Unified Payments Interface (“UPI”) as a payment mechanism with Application Supported by Blocked Amount (“ASBA”) for public issues by way of a circular dated November 01, 2018. The objective of achieving T+3 days from issue closure to listing was sought to be achieved in a three-phased manner. Phase II, wherein the physical movement of forms from intermediaries to Self-Certified Syndicate Banks will be discontinued and only UPI mechanism with T+6 timeline will exist, was implemented from July 01, 2019. Vide circular dated November 08, 2019, instead of implementing Phase III, which is the final stage to achieve T+3 timeline, the Phase II implementation was extended till March 31, 2020.Recognising the prevailing uncertainty caused by Covid-19 pandemic and taking into consideration the industry representations, SEBI has issued a circular dated March 30, 2020 to put Phase III on hold and continue with the current Phase II of UPI ASBA until further notice.
b. Extension of timelines for processing of investor requestsIn light of the national lockdown of 21 days and considering the skeletal staff strength of issuer companies and Registrars to an Issue and Share Transfer Agents (“RTAs”), by way of circular dated April 13, 2020, SEBI has granted a relaxation of 21 days over and above the prescribed time limits for certain activities/investor requests/compliance, such as, processing remat requests, transmission requests, request for issue of duplicate share certificates, handling investor grievances, submission of compliance, audit and half-yearly reports, etc.
c. Extension of certain activities by depository participants, RTAs, and Stock BrokersSEBI has granted relaxation in compliance with the time period for certain activities carried out by depository participants, stock brokers, RTAs/issuer. Vide circular dated April 16, 2020, SEBI has excluded the period from March 23, 2020 till May 17, 2020 while calculating the time period for compliance with the processing of demat request form by issuer/RTA and depository participants, and the uploading of the KYC application and supporting documents of the clients on the system of the KRA.
