SEBI Unveils New Rules to Streamline Markets and Boost Investor Confidence
The Securities and Exchange Board of India (SEBI) has introduced a series of regulatory reforms aimed at enhancing market operations, simplifying IPO norms, and boosting investor protections. These changes impact various sectors, including angel funds, real estate, and infrastructure trusts.
SebiIpo NormsAngel FundsMutual FundsDematerializationReal Estate NewsJun 20, 2025
Key Relaxations for IPO and Listing Norms
SEBI approved several amendments to the SEBI (Issue of Capital and Disclosure Requirements) (ICDR) Regulations and the SEBI (Share Based Employee Benefits and Sweat Equity) (SBEB) Regulations to ease public issue norms. Notably, it extended the exemption from minimum one-year holding requirements to equity shares arising from the conversion of fully paid compulsorily convertible securities (CCS) which were received under approved schemes. Additionally, relevant entities such as alternative investment funds (AIFs), banks, and insurers can now contribute equity shares from converted CCS toward the minimum promoter contribution requirement—an exemption previously limited to promoters. Founders, who received employee stock ownership plan (ESOPs) or similar share-based benefits at least a year prior to filing the draft red herring prospectus (DRHP), will now be allowed to retain or exercise those rights post-listing.
To further support digitization, SEBI mandated dematerialization of securities held by key stakeholders—including promoter groups, directors, key managerial personnel (KMPs), qualified institutional buyers (QIBs), and special rights holders—before filing of the DRHP. This aims to curtail fraud, streamline transfers, and improve regulatory oversight.
Simplified Disclosures and Special Delisting Route for Public Sector Undertakings (PSUs)
The board approved the simplification of placement documents for qualified institutional placements (QIPs), allowing disclosures in a concise format and eliminating redundancy. Key financial and business summaries will replace exhaustive reports, focusing on material risks and objectives, the market regulator says. SEBI also approved a special delisting framework for PSUs where government and PSU ownership crosses 90%. These PSUs can delist via a fixed price mechanism, avoiding the burdensome two-thirds shareholder approval. The fixed price must carry a 15% premium over the floor price, calculated using a joint valuation or prior acquisitions. Unclaimed delisting proceeds will be held by the designated stock exchange for seven years and later transferred to SEBI’s or the government’s investor protection funds.
Boost for Social Enterprises and Angel Funds
The market regulator also expanded the regulatory framework for the social stock exchange (SSE). Legal structures like trusts and societies are now included within the definition of not-for-profit organizations (NPOs). SEBI has also introduced the term 'social impact assessment organization (SIAO)' to ensure a broader and more standardized impact assessment mechanism. NPOs are required to raise funds within two years of registration on the SSE or face automatic deregistration. Annual impact reports are now bifurcated into financial and non-financial disclosures.
In parallel, SEBI rationalized the regulatory regime for angel funds under the AIF framework. From now on, only accredited investors (AIs) can invest in such funds. These AIs will be recognized as QIBs specifically for angel fund investments. The floor and cap for investments have been relaxed to Rs10 lakh to Rs25 crore, and the 25% concentration limit has been removed. Contributions from over 200 investors will also be allowed per investment.
New Avenues for Co-investment and Easier Rules for FPIs and Portfolio Managers
In a major step for AIFs, SEBI approved co-investment opportunities for category-1 and category-2 AIFs under the new co-investment scheme (CIV scheme). Each co-investment in an unlisted company will be executed via a separate CIV scheme within the AIF structure, bypassing the earlier route via portfolio management services (PMS) registration. Foreign portfolio investors (FPIs) investing exclusively in government securities (GS-FPIs) received significant regulatory relief. These include less frequent know-your-customer (KYC) reviews, exemption from providing investor group details, and relaxed rules on reporting material changes. Non-resident Indians (NRIs) and those holding overseas citizenship of India (OCI) can also participate in GS-FPIs without the restrictions applicable to other FPIs, SEBI says.
Portfolio managers, meanwhile, will benefit from a simplified disclosure document format. SEBI has approved the deletion of schedule V from the SEBI (Portfolio Managers) Regulations, 2020, allowing separate treatment for dynamic and static disclosure sections and reducing the need for regulatory amendments for future format updates.
Mutual Funds Approved as Collateral for IAs and RAs
Addressing compliance hurdles for investment advisers (IAs) and research analysts (RAs), SEBI has now allowed the use of liquid mutual funds (MFs) and overnight funds as alternatives to bank fixed deposits (FDs) for meeting deposit requirements. This move aims to resolve the inconsistencies in lien marking and documentation practices across banks, while retaining oversight within the securities ecosystem. Mutual fund units, being digital and low-risk, offer greater flexibility and faster processing. This change complements earlier reforms including lowering qualification criteria and eliminating net-worth thresholds for IAs and RAs.
Merchant Bankers, Debenture Trustees, and Custodians See Eased Norms
Merchant bankers (MBs) will now be allowed to undertake non-SEBI regulated activities within the same legal entity, subject to conditions. These include financial advisory or fee-based services not overseen by any regulator. Categorization of MBs will be based on net worth, with new minimum revenue requirements and specific rules for underwriting and marketing to avoid conflicts of interest, SEBI says. Similarly, debenture trustees (DTs) can now perform certain non-regulated financial services within the same entity. SEBI has also formalized DT rights and issuer obligations, introduced standardized formats for debenture trust deeds, and clarified permitted uses of the recovery expense fund (REF).
Custodians are also relieved from setting up separate entities for offering services outside SEBI’s purview. Instead, they can operate such services within the same legal structure, provided they maintain adequate safeguards for conflict of interest and transparency.
One-time Settlement Schemes for VCFs and NSEL Brokers
SEBI introduced a one-time settlement (OTS) scheme for venture capital funds (VCFs) that failed to wind up their schemes on time but have since migrated to the AIF regime. The settlement amount is based on the length of the delay and the cost of unliquidated assets. Applications must be made by 19 January 2025, the market regulator says. Separately, SEBI announced a settlement scheme for brokers who had traded on the now-defunct National Spot Exchange Ltd (NSEL) platform. The scheme offers monetary and non-monetary settlement options, but excludes brokers under criminal investigation or exchange defaulters.
Push for Dematerialization and Administrative Simplification
To further promote digitization, SEBI has mandated that listed companies issue securities only in dematerialized form for corporate actions such as consolidation, splits, and schemes of arrangement. It also removed the obligation to retain proof of delivery of physical mail for certain signature mismatches, citing improvements in tracking systems. In another procedural simplification, SEBI will now issue certification requirements for 'associated persons' (APs) in the securities market through circulars instead of gazette notifications, allowing faster and more agile regulatory updates.
Frequently Asked Questions
What are the key changes in IPO norms approved by SEBI?
SEBI has extended the exemption from minimum one-year holding requirements to equity shares arising from the conversion of fully paid compulsorily convertible securities (CCS) and allowed relevant entities like AIFs, banks, and insurers to contribute equity shares from converted CCS toward the minimum promoter contribution requirement. Founders receiving ESOPs or similar share-based benefits at least a year prior to filing the DRHP can retain or exercise those rights post-listing.
What is the special delisting framework for PSUs?
PSUs where government and PSU ownership crosses 90% can delist via a fixed price mechanism, avoiding the two-thirds shareholder approval. The fixed price must carry a 15% premium over the floor price, calculated using a joint valuation or prior acquisitions.
How has SEBI simplified the regulatory framework for angel funds?
SEBI now allows only accredited investors (AIs) to invest in angel funds, recognizing them as QIBs specifically for angel fund investments. The floor and cap for investments have been relaxed to Rs10 lakh to Rs25 crore, and the 25% concentration limit has been removed. Contributions from over 200 investors are also allowed per investment.
What are the new co-investment opportunities for AIFs?
SEBI approved co-investment opportunities for category-1 and category-2 AIFs under the new co-investment scheme (CIV scheme). Each co-investment in an unlisted company will be executed via a separate CIV scheme within the AIF structure, bypassing the earlier route via portfolio management services (PMS) registration.
What relief measures have been introduced for foreign portfolio investors (FPIs)?
FPIs investing exclusively in government securities (GS-FPIs) received significant regulatory relief, including less frequent KYC reviews, exemption from providing investor group details, and relaxed rules on reporting material changes. NRIs and OCIs can also participate in GS-FPIs without the restrictions applicable to other FPIs.
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