Sebi may consider 'difficult to recover' tag for untraceable defaulters, regulatory sandboxes

NEW DELHI: Markets regulator Sebi will contemplate proposals to attach a 'difficult to recover' tag for individual defaulters who are found to be 'untraceable', and for so-called regulatory sandboxes on Monday, officials said.

Besides, the board of Sebi would discuss a proposal to amend its investment manager eligibility norms for Infrastructure Investment Trusts (Invits) and also permit fast track issuance of units to existing investors in REITS and Invits, they added. The issues will be discussed at the board meeting of the Securities and Exchange Board of India (Sebi) on Monday. According to the proposal, Sebi plans to attach a 'difficult to recover' tag for individual defaulters who are found to be 'untraceable' as also for cases facing parallel proceedings by other agencies or in various courts and tribunals.

This separate 'difficult to recover' category is for cases where recovery of penalties and other dues from defaulters proves to be virtually impossible and the amount involved is not found to be worth an attempt beyond a point.

However, Sebi can initiate or continue its prosecution proceedings against the defaulters even after such a segregation and recovery procedure can be reopened in case there is any change in the prevailing parameters regarding the defaulter.

The regulator is now considering a modification to its policy on 'difficult to recover' dues to include the criteria of 'untraceable' for individuals and 'parallel proceeding barring recovery'.

In addition, a proposal to amend the Sebi regulations for Real Estate and Infrastructure Investment Trusts (REITS/ Invits) will be discussed to revise eligibility conditions for investment managers in Invits and for streamlining the process of rights issue of units, the officials said. The INVIT regulations require the investment managers to have at least 5 years of experience in fund management or advisory services or development in the infrastructure sector. Besides, the investment manager needs to have at least two employees, each with five years of experience in the infrastructure sector.

The proposed changes in the eligibility norms will help a mega offering worth an estimated Rs 20,000 crore by the National Highways Authority of India (NHAI), which is in the process of setting up an INVIT to monetise its completed public-funded national highways.

Further, Sebi's board will discuss on a proposal to allow live testing of new products, services and business models for selected customers by providing various relaxations and exemptions. The move is aimed at facilitating use of latest financial technology (fintech) innovations in capital markets, they added.

Initially, all Sebi-registered entities will be eligible to participate in such a 'regulatory sandbox' (a live-testing environment), while fintech startups and other entities that are not regulated by Sebi may also be allowed at a later stage, but no exemptions would be granted from the existing investor protection framework, KYC and anti-money laundering rules.pti