SEBI’s Rules For Gold Exchange, Silver ETFs & Other Top Decisions: All You Need To Know

The SEBI Board also cleared a proposal to amend de-listing framework after an open offer.

New Delhi: Market regulator SEBI on Tuesday approved a range of new measures including frameworks for gold, social stock exchanges and introduction of silver Exchange Traded Funds or ETFs.

The Securities and Exchange Board of India has also decided to relax eligibility requirements related to shares with superior voting rights. The SEBI Board also cleared a proposal to amend de-listing framework after an open offer.

Here’s All You Need To Know About SEBI’s New Decisions:

Framework For Gold Exchange

* The instrument representing gold will be called ‘Electronic Gold Receipt (EGR)’ and it will be notified as “securities” under Securities Contracts (Regulation) Act, 1956.

Also Read: SEBI’s Skin-In-The-Game Rules: What A Junior Employee Working In Fund House Needs To Know

* EGRs will have the trading, clearing and settlement features akin to any other security instruments. Any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment.

* The denomination for trading of EGR and conversion of EGR into gold, can be decided by the recognized stock exchanges, with the approval of the market regulator. The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller respectively. 

* The EGR holder can continue to hold the EGR as long as intended. The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs. 

* To lower the costs associated with withdrawal of gold from the vaults, EGRs will be made “fungible” and “inter-operability between Vault Managers” will be allowed.

Vault Managers

* Incorporated in India, the Vault Manager should have net worth of at least Rs 50 crores. It needed to be registered and regulated as SEBI intermediary, for  providing vaulting services meant for gold deposited to create EGRs.

* The obligations of Vault Manager will include accepting deposits, storage and safekeeping of gold, creation of EGR, withdrawal of gold, grievance redressal and periodic reconciliation of physical gold with the records of depository.

“The Gold Exchange is expected to offer a host of benefits for the value chain participants as well as for the entire gold market ecosystem, such as, efficient and transparent price discovery, investment liquidity, assurance in the quality of gold, etc,” SEBI stated in its notification.

Framework for Social Stock Exchange

* The Social Stock Exchange (SSE) will be a separate segment of the existing stock exchanges. SSE must be Non-Profit Organization (NPO) and For-Profit Social Enterprise (FPE) with social intent and impact. It will have to engage in a social activity out of the list of 15 broad eligible social activities approved by the Board.

* Eligible Non-Profit Organizations may raise funds through equity, Zero Coupon Zero Principal (ZCZP) bonds, Mutual Funds, Social Impact Funds, and Development Impact Bonds. NPOs desirous of raising funds on SSE will be required to be registered with SSE.

* Social Venture Funds under SEBI (Alternative Investment Funds) Regulations will be rechristened as Social Impact Funds (SIFs). The corpus requirements for such funds shall be reduced from Rs 20 crore to Rs 5 crore. Also, the reference to “muted returns” needed to be removed.

* Audit of social impact, i.e. social audit will be mandated for Social Enterprises raising funds/registered on SSE. 

Delisting Framework

The SEBI Board also cleared a proposal to amend de-listing framework after an open offer. “If the response to the open offer leads to the delisting threshold of 90% being met, all shareholders who tender their shares shall be paid the same delisting price and if the response to the offer leads to the delisting threshold of 90% not being met, all shareholders who tender their shares shall be paid the same takeover price,” SEBI mentioned.

It will help to make the mergers and acquisitions (M&A) process more easier.

Superior Voting Rights Shares Framework

The Board decided to relax the eligibility requirements related to Superior Voting Rights (SR) Shares framework. As per the review by SEBI, an SR shareholder should not be part of promoter group having net worth more than Rs 1,000 crore.

Related Party Transactions (RPTs)

RPTs are now defined as “all persons or entities forming part of promoter or promoter group irrespective of their shareholding. Any person/entity holding equity shares in the listed entity, as below, either directly or on a beneficial interest basis at any time during the immediately preceding financial year (from April 1, 2022): to the extent of 20% or more; and to the extent of 10% or more with effective from April 1, 2023.

Investor Charter For Securities Market

The Board considered and approved an Investor Charter of SEBI for investors in the securities market. It will help the investors in securities markets to get the relevant information at one place, SEBI said.

SEBI (Alternative Investment Funds) Regulations

The Board also approved amendment to SEBI (Alternative Investment Funds) Regulations, 2012 allowing Category III AIFs to calculate concentration norms based on Net Asset Value of the fund instead of investable funds for investment in listed equities of investee companies. Category III AIFs those which employ diverse or complex trading strategies and may exhert leverage including through investment in listed or unlisted derivatives.

Introduction Of Silver Exchange Traded Funds

The Board further approved an amendment to SEBI (Mutual Funds) Regulations, 1996 to enable introduction of Silver Exchange Traded Funds (ETFs) with certain safeguards in line with the existing regulatory mechanism for Gold ETFs.

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