Towards better governance

THE 213TH BOARD MEETING REVEALS AN INSTITUTIONAL POSTURE OF PRAGMATIC CALIBRATION

- SANDEEP PAREKH Managing partner, Finsec Law Advisors

THE SECURITIES AND Exchange Board of India (Sebi), at its 213th Board meeting on March 23, approved six sets of reforms that reveal its priorities under Chairman Tuhin Kanta Pandey. Five are directed at the market—easing compliance for alternative investment funds (AIFs), reducing transaction costs for foreign portfolio investors (FPIs), widening retail access to social finance, providing operational flexibility to infrastructure investment (InVITs) and real estate investment trusts (REITs), and recalibrating intermediary eligibility criteria.

The sixth and the most consequential is directed inward—the adoption of a comprehensive conflict-of-interest and disclosure framework for Sebi’s own leadership and employees in response to the governance questions that marked the final years of the previous chair.

On AIFs, the Board has approved a pragmatic exit framework. AIFs may now retain liquidation proceeds beyond the permissible fund life where they face pending litigation or tax demands (supported by documentary evidence), anticipated liabilities (with consent of 75% of investors by value), or residual operational expenses (capped at three years). AIFs seeking to surrender registration while holding such residual amounts will be tagged “inoperative” and exempted from periodic filings, Private Placement Memorandum updation, and performance benchmarking. This addresses a genuine regulatory anomaly—funds with no active management being compelled to maintain full compliance infrastructure merely because of residual balances arising from circumstances beyond their control.