The SEBI has told the government that recent budget proposals could undermine its role as regulator, particularly with respect to the recommendation that the minimum public shareholding be raised to 35% from 25%. Already, government-owned companies are laggards in raising this level to the current 25% norm. As many as 31 PSUs including PNB, Bank of India and Corporation Bank have still not complied with the 25% minimum public shareholding norm. Ensuring compliance would be greatly impacted particularly from PSUs as SEBI has to depend on government for funding that could lead to a conflict of interest.
After a spate of resignations by statutory auditors, SEBI is looking to strengthen disclosures to bring more transparency and to strengthen audit committee processes. The market regulator has proposed changes to the Listing Obligations and Disclosure Requirements (LODR), 2009 that will require an auditor to complete and sign the audit report before resigning, and give details of information not provided by a company. In many recent instances, statutory auditors have resigned from listed entities citing lack of disclosure. The current proposal aims to make it mandatory for a resigning auditor to specify details of information not provided by the company.
Mutual funds may lose their attractiveness as a preferred source of capital for corporates and NBFCs as SEBI announced new rules aimed at protecting investors in liquid and debt funds from credit risks. Starting September 2020, fund houses will be allowed to invest only in listed non-convertible debentures (NCDs) and commercial papers (CPs). SEBI has decided to increase the minimum security cover ratio of credit enhanced securities or structured obligations that also include loan against shares (LAS) to four times from prevalent industry standards of 2:1.