SEBI, the regulatory body for the stock market, recently announced significant changes aimed at facilitating foreign investors (FPIs). One of the key developments is the introduction of the Same Day Settlement System, a pilot project known as T+0. This system enables the buying and selling of shares to be completed within the same trading day, unlike the previous T+1 system where settlements occurred a day later.

Simplification of Alternative Investment Funds (AIFs) Rules:

Additionally, SEBI has streamlined the rules governing Alternative Investment Funds (AIFs), providing much-needed relief for investors. These changes were approved during the SEBI board meeting and are set to alleviate complexities for foreign investors operating in the Indian market.

Relief Measures for Foreign Investors:

SEBI has addressed concerns regarding rumors impacting share prices by implementing specific rules. Furthermore, foreign investors holding over 50% investment in a single company or group listed on the stock market and lacking a specific promoter will no longer be subjected to additional information requirements. This exemption comes with certain conditions to ensure regulatory compliance.

Extension of Timeframes:

Foreign funds now have extended timelines for submitting crucial investment information, with the window expanded to 30 days from the previous 7 days. Moreover, in cases where a foreign fund wishes to terminate its registration in India, it has 180 days to sell its entire investment instead of the previous 30 days. An additional 180 days may be granted, contingent upon depositing 5% of the sale as a penalty into SEBI’s Investment Protection and Education Fund (IPEF).

Simplified Issuance Process:

SEBI has also simplified the process for companies issuing shares by eliminating the requirement of a 1% security deposit for public and rights issues. Additionally, the definition of the promoter group has been revised, now including non-promoter companies holding a 5% or higher stake post-IPO.

Understanding T+0 Settlement:

Under the T+0 settlement system, transactions involving the purchase or sale of shares are completed on the same trading day. This seamless process ensures immediate payment upon buying shares and swift transfer to the demat account. The new system is slated to be implemented from March 28, providing investors with the flexibility to choose between T+0 and T+1 settlement options.

Transition from T+1 Settlement System:

Previously, the T+1 settlement system mandated that payment and ownership rights for shares bought or sold would be received the next trading day. This shift marks a significant change from the previous T+2 settlement system, which delayed payment and ownership changes by an additional trading day. The T+1 system was introduced on January 27, 2023, replacing the previous T+2 settlement process.