SEBI MANDATES MORE DISCLOSURES: ASBA-like facility for secondary trades

End to permanent board seats; PE funds can become MF sponsors

- ASHLEY COUTINHO

THE SECURITIES AND Exchange Board of India (Sebi) on Wednesday approved key proposals with regard to introducing an ASBA-like mechanism for secondary trades, listing obligations, material disclosures, mutual fund sponsors and ESG norms.

The Sebi board accepted the proposal to introduce a settlement mechanism for stock trades that will result in investors' funds effectively leaving their bank accounts only after trades are completed. Under this framework, Unified Payments Interface (UPI) mandates will be integrated with the secondary market to provide a block mechanism. Clients will be able to block funds in their bank accounts for trading in the secondary market, instead of transferring them upfront to the broker. This would be similar to the Application Supported by Blocked Amount (ASBA) facility for IPOs and would be optional for investors as well as stock brokers.

Bypassing the broker in the trade settlement process will protect investors'monies from being misappropriated by stock brokers, said experts. "Introduction and utilisation of ASBA facility is aimed at bringing efficiency in the secondary market ecosystem by allowing the margin between settlement obligations," Suvigya Awasthy, associate partner, PSLAdvocates & Solicitors, said.

She added: "It is likely benefit the investors who can earn interest on the blocked funds in their savings account till the time the amount is debited." The Sebi board has cleared a framework to provide for an institutional mechanism for prevention and detection of fraud or market abuse by stock brokers. Sebi expressed its displeasure about mule accounts used by brokers for fraudulent trades.