What is SEBI?
SEBI stands for the Securities and Exchange Board of India. It was initially constituted as a non-statutory body by the Government of India through a resolution on April 12, 1988. Subsequently, it was established as a statutory body in 1992 under the Securities and Exchange Board of India Act, 1992, which came into force on January 30, 1992. SEBI regulates the securities market in India and oversees the functioning of stock markets and mutual funds, while also ensuring investor protection.
Why was SEBI Established?
SEBI was set up to create a transparent and robust environment for resource mobilization and allocation. It ensures that the securities market infrastructure and practices meet growing market demands. SEBI serves the following groups:
1. Issuers – Offers a structured marketplace to raise capital efficiently.
2. Investors – Ensures protection and provides timely, accurate disclosures.
3. Intermediaries – Fosters a competitive environment supported by adequate infrastructure.
Structure of SEBI
SEBI operates with a corporate structure comprising over 20 specialized departments, each headed by a department chief. Key departments include corporate finance, enforcement, investment management, legal affairs, commodity derivatives regulation, etc.
The hierarchical structure includes:
* A Chairperson, nominated by the Union Government.
* Two officers from the Union Finance Ministry.
* One member from the Reserve Bank of India.
* Five other members, nominated by the Government of India.
Objectives of SEBI
1. Investor Protection: To safeguard the interests of investors by ensuring transparency, fairness, and security in the securities market. SEBI strives to instil investor confidence through effective oversight, timely disclosures, and educational initiatives.
2. Prevention of Fraudulent and Unfair Trade Practices: To curb malpractices such as insider trading, price rigging, and market manipulation by enforcing stringent regulatory norms and surveillance mechanisms across stock exchanges and market participants.
3. Establishment of Ethical Standards for Intermediaries: To formulate and enforce a comprehensive code of conduct for financial intermediaries such as brokers, underwriters, and merchant bankers, thereby ensuring integrity, accountability, and professionalism in their dealings.
4. Balancing Regulation and Self-Regulation: To maintain an optimal equilibrium between statutory regulations and self-regulatory practices, encouraging market discipline while ensuring adequate investor protection and systemic stability.
Functions of SEBI
SEBI performs a three-fold function: Protective, Regulatory, and Developmental, each aimed at ensuring the smooth functioning, fairness, and efficiency of the Indian securities market.
1. Protective Functions
The protective role of SEBI is centred around safeguarding the interests of investors and ensuring that the market operates in a fair, transparent, and secure manner. Key activities include:
* Prohibition of Insider Trading– SEBI prohibits insider trading, which involves trading of securities by individuals with access to unpublished price-sensitive information, such as directors, employees, or promoters. To curb this malpractice, SEBI enforces strict regulations, including barring companies from purchasing their own shares through the secondary market under certain conditions.
* Prevention of Price Rigging– Price rigging refers to deliberate manipulation of the market price of securities to create artificial demand or supply. SEBI monitors trading activities to detect and deter such manipulative practices, ensuring market integrity.
* Promotion of Fair Trading Practices– SEBI works to eliminate fraudulent, unfair, and deceptive practices in securities transactions, thereby fostering investor trust and market transparency.
* Investor Education and Awareness– SEBI conducts regular investor education programs—both online and offline—to enhance public understanding of securities markets, investment strategies, and financial planning, empowering investors to make informed decisions.
2. Regulatory Functions
The regulatory function involves framing and enforcing rules, regulations, and guidelines for participants in the securities market, with the goal of maintaining orderly conduct and protecting market efficiency.
* Regulation of Market Intermediaries and Corporates– SEBI lays down a comprehensive framework of rules, a code of conduct, and operational guidelines that govern the behaviour of intermediaries such as brokers, underwriters, and merchant bankers, as well as listed companies.
* Regulation of Takeovers and Mergers– SEBI monitors and regulates the acquisition and takeover processes of companies to ensure transparency and protect the rights of shareholders.
* Oversight of Stock Exchanges– SEBI has the authority to conduct inspections, audits, and inquiries into the functioning of stock exchanges to ensure compliance with statutory norms and maintain discipline in trading.
* Supervision of Brokers and Other Market Participants– SEBI regulates the operations of stock brokers, merchant bankers, portfolio managers, and other intermediaries to ensure they operate in a fair and transparent manner.
3. Developmental Functions
The developmental function of SEBI is aimed at promoting innovation, efficiency, and growth in the Indian capital markets, while also enhancing investor participation and intermediary capabilities.
* Training and Capacity Building- SEBI organizes training programs and certification courses for market intermediaries to improve their professional competence and ensure adherence to ethical standards.
* Promotion of Online and Electronic Trading– SEBI has played a pivotal role in introducing and encouraging electronic trading systems and internet-based platforms through registered stock brokers, enhancing accessibility and transparency in trading.
* Optional Underwriting System– By making underwriting optional for public issues, SEBI has enabled issuers to reduce the overall cost of raising capital, thereby facilitating ease of doing business in the securities market.
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, commonly known as the SEBI LODR Regulations, were enacted to consolidate, standardize, and harmonize the provisions governing disclosure and corporate governance requirements across all listed entities in India. These regulations replaced the erstwhile listing agreements entered into between stock exchanges and listed companies, thereby bringing uniformity and legal enforceability to the obligations of listed entities.
The LODR Regulations are designed not only to simplify and codify disclosure norms but also to align them with the Companies Act, 2013, ensuring consistency in compliance and enhancing transparency in financial and corporate disclosures. A central objective of the LODR framework is to strengthen corporate governance practices, increase accountability of listed entities, and protect the interests of investors and stakeholders in the capital markets.
Key Features of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
The SEBI LODR Regulations, 2015 provide a comprehensive framework to ensure uniformity, transparency, and accountability among listed entities. Some of the salient features include:
1. Applicability
These regulations apply to all companies that have listed their specified securities—such as equity shares, non-convertible securities, and convertible securities—on any recognized stock exchange in India, including those listed on the SME (Small and Medium Enterprises) Exchange.
2. Corporate Governance Norms
The LODR Regulations incorporate detailed corporate governance requirements aimed at promoting ethical and accountable conduct:
* Board Composition: Mandates an optimum mix of executive and non-executive directors, including a specified number of independent directors and at least one woman director on the board.
* Board Committees: Requires the constitution and effective functioning of key committees such as:
– Audit Committee
– Nomination and Remuneration Committee
– Stakeholders Relationship Committee
* Related Party Transactions: Imposes stringent disclosure norms and approval mechanisms to ensure transparency and mitigate conflicts of interest in transactions involving related parties.
* Governance Reporting: Requires detailed annual and quarterly reports on the implementation of corporate governance principles and compliance.
3. Disclosure Requirements
To ensure informed investor decision-making, listed entities must make periodic and event-based disclosures, including:
* Financial Results: Timely publication of quarterly, half-yearly, and annual financial statements.
* Shareholding Pattern: Disclosure of holdings by promoters, institutional investors, and public shareholders.
* Material Events or Information: Mandatory disclosure of any event that may have a bearing on the company’s financial performance or investor interest (e.g., mergers, acquisitions, resignations, litigation).
* Compliance Reports: Regular filings on corporate governance practices and adherence to SEBI norms.
4. Financial Reporting Standards
Specifies the format, frequency, and timelines for preparing and publishing financial statements, in accordance with applicable accounting standards and SEBI guidelines.
5. Shareholder Empowerment
Ensures the rights of shareholders are protected by mandating their participation in critical corporate decisions such as the appointment/removal of directors, approval of related party transactions, and changes in capital structure.
6. Continuous Compliance and Monitoring
Listed entities are subject to ongoing monitoring, with mandatory filings and disclosures. SEBI has enforcement powers to impose penalties, suspend trading, or initiate legal proceedings in case of non-compliance.
Objectives of the SEBI LODR Regulations, 2015
The primary goals of these regulations are aligned with SEBI’s broader mandate of investor protection, market efficiency, and good governance. The core objectives include:
* Enhancing Transparency: To ensure that all material information related to the company is disclosed in a timely, accurate, and comprehensive manner to all stakeholders, thereby reducing information asymmetry.
* Strengthening Corporate Governance: To enforce high standards of governance by ensuring the presence of independent and qualified board members, empowered board committees, and a robust framework for oversight and accountability.
* Protecting Investor Interests: To uphold the rights of investors—especially minority shareholders—by ensuring fair disclosures, equitable treatment, and access to information for informed decision-making.
* Promoting Market Integrity: To maintain the trust and integrity of the securities market by preventing insider trading, fraud, and market manipulation through mandatory disclosures and regulatory oversight.
* Alignment with Global Best Practices: To bring Indian capital market practices in line with international standards such as those prescribed by the IOSCO (International Organization of Securities Commissions), fostering global investor confidence.
Pure High Value Debt Listed Entitis under SEBI (LODR) Regulations, 2015
Under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Pure High Value Debt Listed Entities (HVDLEs) are defined as those listed entities that have only their non-convertible debt securities (such as debentures or bonds) listed on a recognized stock exchange in India, and do not have any of their equity securities listed.
An entity qualifies as a Pure HVDLE if the outstanding value of its listed non-convertible debt securities is Rs.1,000 crore or more as on March 31st of the preceding financial year. These entities are subject to enhanced disclosure and corporate governance requirements as prescribed by SEBI, with the objective of strengthening investor protection and market discipline in the debt segment.
SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025
In March 2025, the Securities and Exchange Board of India (SEBI) introduced a significant amendment to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, by inserting a new Chapter VA (Regulations 62B to 62Q), specifically tailored for Pure High Value Debt Listed Entities (HVDLEs).
Prior to this amendment, these entities were governed by certain corporate governance provisions under Regulations 15 to 27, which were originally framed for equity-listed entities. Recognizing the distinct nature of debt markets and investor interests, SEBI has now carved out a separate framework more suited to the characteristics and risks associated with high-value debt instruments.
Rationale behind the Amendment:
* Tailored Corporate Governance: To implement governance standards relevant to debt-listed entities, acknowledging the fundamental differences between equity and debt holders’ interests.
* Ease of Compliance: To provide clarity and reduce regulatory complexity by introducing distinct, targeted obligations rather than requiring compliance with norms meant for equity-listed entities.
* Enhanced Investor Protection: To strengthen the governance ecosystem for investors in high-value debt instruments through improved transparency and oversight.
Key Features of the Amendment
1. Revised Definition and Applicability:
* The threshold to qualify as a High Value Debt Listed Entity has been raised from Rs. 500 crore to Rs. 1,000 crore in outstanding listed non-convertible debt securities, as on March 31st of the financial year.
* Chapter VA applies exclusively to entities with only non-convertible debt securities listed, and no other specified securities (e.g., equity shares).
* Sunset Clause: If the outstanding value of listed debt falls below ₹1,000 crore for three consecutive financial years, Chapter VA will cease to apply.
* Entities crossing the Rs.1,000 crore threshold after March 31, 2025, will have a six-month window to comply with the new provisions.
2. Board of Directors (Regulation 62D):
* Must have a balanced composition of executive and non-executive directors.
* At least one woman director is mandatory.
* A minimum of 50% non-executive directors is required.
* If the Chairperson is a non-independent director or related to the promoter/CEO, at least 50% of the board must comprise independent directors.
* Age Limit: Appointment or continuation of a non-executive director aged 75 years or above requires a special resolution along with a justification in the explanatory statement.
* Continuation Tenure: Every director (except whole-time, managing, nominee, and retiring directors) must obtain shareholder approval every 5 years. Directors with five or more years of tenure as on March 31, 2025, must seek approval at the first general meeting after that date.
* Filling Vacancies: Vacancies must be filled within three months. If non-compliance arises due to expiry of tenure, the vacancy must be filled immediately, unless the board remains compliant.
* Board Meetings: A minimum of four meetings annually, with no more than 120 days between two meetings.
* Quorum: One-third of total strength or three directors, whichever is higher, with at least one independent director. Participation via video conferencing is permitted.
3. Board Committees:
* Audit Committee (Regulation 62E): Mandatory; functions aligned with Regulation 18 applicable to equity-listed entities.
* Nomination and Remuneration Committee (Regulation 62F): Mandatory; board has flexibility to assume these functions.
* Stakeholders Relationship Committee (Regulation 62G): Mandatory; board may also discharge these functions.
* Risk Management Committee (Regulation 62H): Formation is optional; board can discharge its functions directly.
4. Related Party Transactions (Regulation 62K):
* A formal policy on materiality and handling of RPTs is required, to be reviewed at least every three years.
* Audit committee approval is mandatory for all material RPTs and subsequent material modifications.
* New Requirement – No-Objection Certificates (NOCs):
For all material RPTs entered on or after April 1, 2025:
– Prior NOCs must be obtained from the Debenture Trustee and debenture holders (excluding related parties and those holding >50% debentures), routed through the Trustee.
– Shareholder approval must be obtained following the NOCs.
* Disclosure Requirements: All RPTs must be disclosed to the stock exchange along with half-yearly standalone financial results, in a prescribed format.
5. Subsidiaries (Regulation 62L):
* At least one independent director from the HVDLE’s board must be on the board of an unlisted material subsidiary (whether in India or abroad).
* Disposal of shareholding in such a subsidiary resulting in loss of control or reduction to 50% or less requires special resolution.
* The subsidiary’s management must periodically inform the board of the HVDLE about significant transactions.
* The Audit Committee of the HVDLE must review the financials and investments of the unlisted material subsidiary.
6. Other Key Governance Requirements:
* Secretarial Audit (Regulation 62M): Mandatory for both the HVDLE and its material unlisted Indian subsidiaries; the audit report must be annexed to the annual report.
* Secretarial Compliance Report (Regulation 62N): Must be filed with the stock exchanges within 60 days from the end of each financial year.
* Compliance Officer (Regulation 6): Appointment of a qualified Company Secretary as the Compliance Officer is mandatory.
* Maximum Number of Directorships (Amendment to Regulation 17A):
Directorships in HVDLEs will now be counted towards the cap of seven listed entities for any individual (inclusive of independent directorships).
This amendment comes into force on September 27, 2025, or the date of the Annual General Meeting (AGM), whichever is later.
Key Takeaways from the SEBI (LODR) Amendment Regulations, 2025 for High Value Debt Listed Entities (HVDLEs)
1. Introduction of a Dedicated Corporate Governance Framework:
* Earlier Framework (2015): Pure debt-listed entities were governed under Regulations 15 to 27, originally tailored for equity-listed entities. These provisions were often applied on a “comply or explain” basis.
* Revised Framework (2025): A new Chapter VA (Regulations 62B to 62Q) has been incorporated, exclusively governing pure High Value Debt Listed Entities. This recognizes the unique nature of debt instruments and provides a customized regulatory regime aligned with their risk profile and investor expectations.
2. Revised Threshold Criteria and Sunset Provision:
* Previous Threshold: Entities with listed non-convertible debt securities of ₹500 crore or more qualified as HVDLEs.
* Amended Threshold: The threshold has been increased to ₹1,000 crore. Further, a sunset clause has been introduced — if the outstanding listed debt remains below ₹1,000 crore for three consecutive financial years, the obligations under Chapter VA shall no longer apply.
3. Committee Requirements: Mandatory and Discretionary-
* Then (2015): There was no clear demarcation; governance committees were required as per general norms applicable to listed companies.
* Now (2025):
– Constitution of an Audit Committee is mandatory.
– The Nomination and Remuneration Committee, Stakeholders Relationship Committee, and Risk Management Committee may be constituted at the Board’s discretion, with the Board itself empowered to discharge their functions — thereby offering operational flexibility without compromising governance.
4. Stricter Controls on Related Party Transactions (RPTs):
* Earlier Regime: Required prior approval of Audit Committee and shareholders for material RPTs.
* Amended Regime:
– Prior to shareholder approval, No-Objection Certificates (NOCs) must be obtained from both the Debenture Trustee and non-related debenture holders holding over 50% in value, for all material RPTs entered into on or after April 1, 2025.
– This enhances protection of the interests of debt investors and introduces a dual-layered approval mechanism.
5. Prescribed Board Composition and Governance Norms:
* Standard Norms (2015): General requirements regarding board composition (e.g., presence of independent and woman directors).
* Enhanced Norms (2025):
– At least one woman director and minimum 50% non-executive directors on the Board.
– Special resolution with justification required to appoint/retain non-executive directors aged 75 years or more.
– Mandatory re-approval by shareholders every five years for non-executive directors (except certain exclusions), strengthening board accountability and rotation.
– Defined timelines for filling board vacancies and stricter quorum requirements for board meetings.
6. Inclusion of HVDLEs in Directorship Limits:
* Earlier: HVDLEs were not specifically included in calculating the permissible number of directorships.
* Now: From September 27, 2025, or the date of AGM (whichever is later), HVDLEs will be considered in determining the maximum number of listed directorships (Regulation 17A), aligning them with broader governance norms applicable to listed entities.
7. Codification of Secretarial Audits and Compliance Reporting:
* Before 2025: Compliance obligations existed but lacked detailed codification.
* Post Amendment:
– Secretarial Audit Report (Regulation 62M) is now mandatory and must be annexed to the annual report.
– Secretarial Compliance Report (Regulation 62N) must be filed with the stock exchanges within 60 days of the financial year-end, ensuring formal and time-bound disclosures.
