Sebi board approves slew of reforms; widens investment avenues, FPI access
The Securities and Exchange Board of India (SEBI) board approved a package of reforms to widen investment avenues, deepen market participation, and simplify regulatory norms.
A new set of Portfolio Managers Regulations was approved, replacing the 2020 framework, allowing portfolio managers to invest in IPOs, primary market debt, and expanded overseas securities, and permitting up to 10% of client assets in investment-grade unlisted non-convertible debentures with client consent.
Foreign Portfolio Investors (FPIs) were permitted to take positions in physically settled, non-agricultural commodity derivative contracts, subject to exiting positions at least three days before expiry or the start of the tender period.
REITs and publicly listed InvITs were authorised to issue Depository Receipts in overseas jurisdictions, and the voting threshold for certain unitholder approvals was revised from 75% of all outstanding units to 75% of votes cast.
The pool of "accredited investors" was expanded, and a Fourth Settlement Scheme was approved for non-genuine trades in illiquid BSE stock options between April 2014 and September 2015.
SEBI — Statutory Basis and Regulatory Powers
SEBI was established as a non-statutory body in 1988 and given statutory powers through the Securities and Exchange Board of India Act, 1992, which came into force on January 31, 1992. It regulates stock exchanges, intermediaries (brokers, merchant bankers, portfolio managers, mutual funds), and now REITs/InvITs, through a quasi-legislative (framing regulations), quasi-executive (surveillance/inspection), and quasi-judicial (adjudication) mandate.
Key Details
- SEBI Act, 1992 — objectives: investor protection, market development, and regulation of the securities market
- SEBI's board can amend or notify new regulations directly (subordinate legislation) without needing a fresh Act of Parliament — this is how the new Portfolio Managers Regulations, 2026 replace the SEBI (Portfolio Managers) Regulations, 2020
- SEBI also derives powers from the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996
The board-level "approval of a slew of reforms" reported in the news is SEBI exercising its quasi-legislative rule-making power — the reforms take effect once notified as amended/new regulations under the SEBI Act, not through Parliament.
Foreign Portfolio Investors (FPI) — Regulatory Framework
FPIs are non-resident investors registered under the SEBI (Foreign Portfolio Investors) Regulations, 2019, which replaced the 2014 FPI regulations and simplified the investor categorisation.
Key Details
- SEBI (FPI) Regulations, 2019 reduced FPI classification from three categories (under the 2014 regulations) to two: Category I (government and government-related investors, e.g. central banks, sovereign wealth funds) and Category II (pension funds, and appropriately regulated entities such as banks, insurers, asset managers, broker-dealers)
- FPIs were traditionally restricted from commodity derivatives, especially agricultural contracts, due to concerns about influencing farm-linked prices
- The new reform permits FPIs into physically settled, non-agricultural commodity derivatives (e.g., metals, energy) with a mandatory exit 3 days before expiry/tender period
Widening FPI access to non-agri commodity derivatives is a calibrated liberalisation — it deepens the commodity derivatives market while retaining the agricultural exclusion that shields food-price-sensitive contracts from foreign speculative flows.
REITs and InvITs — Regulatory Architecture
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are regulated under the SEBI (REIT) Regulations, 2014 and SEBI (InvIT) Regulations, 2014 respectively — pooled investment vehicles that let retail and institutional investors hold income-generating real estate/infrastructure assets via tradeable units.
Key Details
- Minimum initial offer size for REITs/InvITs: Rs 250 crore, with a minimum public float of 25%; minimum asset base for listing: Rs 500 crore (thresholds have been eased over time — e.g., minimum investment for privately placed InvITs cut from Rs 1 crore to Rs 25 lakh)
- REITs/InvITs are required to distribute a high proportion of distributable cash flows to unit holders on a periodic basis
- Depository Receipts (DRs) allow instruments representing underlying securities to be issued and traded in a foreign jurisdiction — until this reform, this route was not available to REIT/InvIT units
Authorising DR issuance lets Indian REITs/InvITs tap overseas capital pools indirectly (similar to how Indian companies use ADRs/GDRs), while the revised voting threshold (75% of votes cast, not of all outstanding units) makes it procedurally easier to pass unitholder resolutions such as sponsor changes.
- SEBI Act enacted: 1992; SEBI became statutory regulator: January 31, 1992
- SEBI (Portfolio Managers) Regulations, 2020 replaced by a new 2026 framework; regulation text shortened from 70 to 33 pages
- SEBI (FPI) Regulations, 2019 — two FPI categories (down from three under the 2014 regulations)
- REIT/InvIT minimum initial offer size: Rs 250 crore; minimum public float: 25%; minimum asset base for listing: Rs 500 crore
- Accredited investor threshold (as reformed): individuals with Rs 5 crore in securities market assets; body corporates with Rs 20 crore
- Fourth Settlement Scheme covers non-genuine trades in illiquid BSE stock options between April 1, 2014 and September 30, 2015
- Vault manager net worth requirement raised from Rs 50 crore to Rs 75 crore