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Securities and Exchange Board of India (SEBI), in its board meeting on Tuesday, December 20, 2022, amended buyback regulations and introduced a framework to facilitate execution only platforms (EOPs) for direct plans of mutual fund schemes.
Buyback reforms by the regulator
SEBI plans to phase out buyback through the stock exchange route in a gradual manner. It increased the minimum utilisation of the amount earmarked for buyback through the stock exchange route from existing 50 per cent to 75 per cent. There will be a separate window on stock exchanges for undertaking buyback till the time buyback through stock exchange is permitted.
For doing the buyback through the tender route, the regulator has reduced the timeline for completion of buyback by 18 days by removing the requirement of filing a draft letter of offer with SEBI and its observations. Changes in buyback norms are aimed to streamline the process of buyback and create a level playing field for investors.
Framework to facilitate execution only platform for direct plans of mutual fund schemes
Currently there is no regulatory framework in place to facilitate the provision of such "execution only services" in direct plans of mutual fund schemes, as investment advisers (IAs) and stock brokers offer execution services in direct plans of mutual fund schemes through digital mode. The execution only platforms (EOPs) may be granted registration under either of the two categories - Category 1 EOP as an agent of the asset management companies (AMCs), registered with AMFI or Category 2 EOP as an agent of investor, registered as a stock broker. The detailed framework and the modalities of implementation shall be notified through circulars by SEBI.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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