Sebi board to consider FPI settlement norms ease, intermediary reforms on Monday

Markets regulator Sebi board is set to meet on Monday to deliberate on a wide-ranging agenda, including a proposal to ease fund settlement norms for foreign portfolio investors (FPIs), and changes to regulatory frameworks for market intermediaries, people familiar with the matter said.

A key item on the agenda is a proposal to allow Foreign Portfolio Investors (FPIs) to net funds for same-day cash market trades, instead of settling each trade individually.

Under the existing framework, an FPI needs to settle equity cash market trades on a gross basis, funding each purchase transaction independently of any sale transactions, even on the same day.

Sebi has proposed permitting “netting of funds”, which would allow FPIs to use proceeds from same-day sales to offset purchase obligations, thereby requiring them to meet only the net payable amount.

The move is aimed at enhancing operational efficiency and reducing the cost of funding for them, especially on index rebalancing days. Also, it is expected to minimise forex-related costs arising from timing mismatches between inflows and outflows.

The proposal follows concerns that the current gross settlement system imposes additional funding requirements on FPIs for at least one extra day, increasing transaction costs.This will be the fifth board meeting chaired by Sebi Chairman Tuhin Kanta Pandey since he assumed office on March 1, 2025.Apart from FPI-related reforms, the board will review a series of governance and regulatory proposals. These include a comprehensive overhaul of the “fit and proper person” criteria for market intermediaries, to enhance procedural clarity and fairness, the people familiar with the matter said.

Under this, Sebi is considering a proposal to abolish the reference to initiation of winding-up proceedings as a disqualification in a bid to ensure that only a final winding-up order, and not mere initiation of proceedings, is considered while assessing whether a person is fit and proper.

Also, the regulator is looking to explicitly include the right to a hearing in the rules. Although the practice of giving a reasonable opportunity of being heard already exists, it has been proposed to be clearly stated in the rules to remove any procedural ambiguity.

The board will also take up ease-of-doing business proposals related to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

Another significant agenda item is the consideration of a report submitted by a high-level panel on conflict of interest and transparency, they added.

The regulator will discuss the panel’s report, which proposes comprehensive reforms to bring in transparency by way of greater disclosure and a “zero-tolerance” culture to address conflict of interest of top officials of Sebi.