Introduction

Edition 9/20-21

Week – September 14^th to September 18^th

Quote for the week:

“Be passionate and bold. Always keep learning. You stop doing useful things if you don’t learn. So the last part to me is the key, especially if you have had some initial success. It becomes even more critical that you have the learning ‘bit’ always switched on.”

- Satya Nadella, CEO Microsoft

We welcome you to our weekly newsletter for this week!

The ‘Swift e-Bulletin’ - weekly newsletter, covers all regulatory updates and critical judgements passed during the week. We hope that you liked our previous editions and found it to be of great value in its content. We want this newsletter to be valuable for you so, please share your feedback and suggestions to help us improve.

In the wake of COVID-19, we all are witnessing many relaxations, exemptions and amendments to the various legislations by regulatory authorities to ease out the operations during this time of crisis.

Further, various regulatory authorities have been proactive in bringing significant regulatory changes in recent challenging times. This week’s newsletter covers various circulars/notifications issued by certain regulatory authorities such as the Securities and Exchange Board of India (“SEBI”), the Reserve Bank of India (“RBI”), the Insolvency and Bankruptcy Board of India (“IBBI”) and the Ministry of Commerce and Industry, and critical judgements and orders passed by the National Company Law Tribunal (“NCLT”), SEBI, Supreme Court and High Court. With a constant endeavor to cover all regulatory updates and judgements/orders at one place, we have prepared a comprehensive summary for quick reference of such updates and Judgements / orders issued during the week of September 14, 2020 to September 18, 2020.

Thank you,

Swift Team

Table of Contents

REGULATORY UPDATES

SEBI UPDATES

1.  SEBI introduces clarification on guidelines regarding collection and reporting of margins by Trading Member (TM) / Clearing Member (CM) in cash segment vide circular dated September 15, 2020:

• SEBI, vide circulars dated November 19, 2019 and July 31, 2020, issued guidelines with regard to collection of margins from clients and reporting of short collection / non-collection of margins by Trading Member (TM) / Clearing Member (CM).
• Paragraph 4.1.1 and 4.1.2 of the SEBI circular dated November 19, 2019, specifies that, like in derivatives segment, the TMs/CMs in cash segment are also required to mandatorily collect upfront Value at Risk (VaR) margins and Extreme Loss Margins (ELM) from their clients. The TMs / CMs will have time till ‘T+2’ working days to collect margins (except VaR margins and ELM) from their clients. It is to be noted that the clients must ensure that the VaR margins and ELM are paid in advance of trade and other margins are paid as soon as margin calls are made by the Stock Exchanges / TMs / CMs. The period of T+2 days has been allowed to TMs / CMs to collect margin from clients taking into account the practical difficulties often faced by them only for the purpose of levy of penalty and should not be construed that clients have been allowed 2 days to pay margin due from them.
• Paragraph 2.1 of the SEBI circular dated July 31, 2020, inter-alia, specifies that If TM / CM collects minimum 20% upfront margin in lieu of VaR and ELM from the client, then penalty for short-collection / non-collection of margin shall not be applicable.
• In view of the representations received with regard to levy of penalty for non-collection of “other margins” (other than VaR and ELM) on or before T+2 days from clients by TM / CM, the following has been clarified:
• If pay-in (both funds and securities) is made by T+2 working days, the other margins would have deemed to have been collected and penalty for short / non collection of other margins shall not arise.
• If Early Pay-In of securities has been made to the Clearing Corporation (CC), then all margins would have deemed to have been collected and penalty for short / non-collection of margin including other margins shall not arise.
• If client fails to make pay-in by T+2 working days and TM / CM do not collect other margins from the client by T+2 working days, the same shall also result in levy of penalty as applicable.

To read the circular in detail, please click here.

2. SEBI permits listing and trading of units of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) on recognized stock exchanges in International Financial Services Centers (IFSC) vide circular dated September 16, 2020:

• Securities and Exchange Board of India (IFSC) Guidelines, 2015 were notified by SEBI on March 27, 2015, which came into force on April 01, 2015.
• Clause 7 of SEBI (IFSC) Guidelines, 2015 specifies the types of securities in which dealing may be permitted by stock exchanges operating in IFSC. SEBI has permitted ‘Units of InvITs and REITs by whatever name called in the Permissible Jurisdictions’ as permissible security under sub-clause (vi) of Clause 7 of SEBI (IFSC) Guidelines, 2015.
• Accordingly, ‘Units of InvITs and REITs by whatever name called in the Permissible Jurisdictions’ meeting the following conditions may be permitted to list on stock exchanges operating in IFSC:
• Such InvITs and REITs which are incorporated/settled in Permissible Jurisdictions, as may be notified by the Government of India from time to time pursuant to notification no. G.S.R. 669(E) dated September 18, 2019 in respect of sub-rule 1 of rule 9 of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005; In this regard, the Government of India vide notification dated November 28, 2019, has notified the list of Permissible Jurisdictions in pursuance of notification dated September 18, 2019. Accordingly, a list of Permissible Jurisdictions for the purpose of this clause has been placed at Annexure A to the circular.
• Such InvITs and REITs are regulated by the securities market regulator(s) in the Permissible Jurisdictions.
• Such InvITs and REITs are listed on any of the specified international exchanges in the Permissible Jurisdiction. A list of International Exchanges for the purpose of this clause have also been placed at Annexure A to the circular.
• SEBI has also stated that, stock exchanges in IFSC shall evolve a detailed framework prescribing the initial and continuous listing requirements for such InvITs and REITs whose units are listed/proposed to be listed on stock exchanges in IFSC (based on point 3 above).

To read the circular in detail, please click here.