December 12, 2019
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SEBI Tightens Disclosure Norms On Loan Default, Doubles Minimum PMS Investment Size

The move to tighten disclosure norms will ensure better transparency, says the market regulator.

SEBI Tightens Disclosure Norms On Loan Default, Doubles Minimum PMS Investment Size
SEBI chairman Ajay Tyagi.
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SEBI Tightens Disclosure Norms On Loan Default, Doubles Minimum PMS Investment Size
outlookindia.com
2019-11-20T18:53:27+0530

Tightening its disclosure norms for listed companies, markets regulator SEBI on Wednesday asked them to report full facts of any loan default within 24 hours for any failure of repayment of principle and interest amount beyond 30 days.

The market regulator also doubled the minimum investment limit by clients in a portfolio management service (PMS) to Rs 50 lakh.

It also enhanced the net worth requirement of portfolio managers to Rs 5 crore from Rs 2 crore.

"The portfolio managers regulations have been thoroughly revised. Existing portfolio managers must meet the enhanced requirement within 36 months," said SEBI chairman Ajay Tyagi.

The regulator has also made it mandatory for all portfolio managers except those providing only advisory services to appoint a custodian.

Non-discretionary advisory portfolio managers will not be allowed to invest more than 25 per cent of their asset under management (AUM) in unlisted securities.

The move to tighten disclosure norms will ensure better disclosure and transparency, Sebi chief Ajay Tyagi told reporters after the board meeting.

"The board has decided that in case of any default in repayment of principle and interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities shall promptly, but not later than 24 hours from the 30th day, disclose the fact of such default," Sebi said.

The decision has been taken to address the gaps in the availability of information with respect to defaults, the regulator said.

This would be applicable from January 1, 2020.

There have been several instances of huge loan defaults by corporates, including in cases like Infrastructure Leasing & Financial Services Ltd (IL&FS). In many cases, the disclosure about loan default has been very late and share prices have fallen sharply.

"The objective of new default disclosure is to get more openness to help investors," Tyagi said.

Asked whether RBI agreed to the new norms, Tyagi said that a deputy governor of the central bank is on the board of Sebi and therefore they are also in agreement.

"One day default disclosure was not agreed to by the board. This scheme of 30 days is implementable," he said referring to an earlier proposal of making a loan default disclosure within a day of default.

Tyagi also said that the board had discussions on proxy advisory firms as well and will discuss more in the next meet.

(With inputs from agencies)

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