The Securities and Exchange Board of India (Sebi) may approve proposals at its board meeting of India (Sebi) that will impact small and medium enterprises (SMEs), angel funds and the broader securities market through IPO rules, insider trading rules and compliance for registered entities. December 18.
One of the most eagerly awaited changes is a proposed revision of the rules for SME IPOs. The regulator is likely to increase the minimum filing size for such IPOs ₹1 lakh to ₹2-4 lakh, limiting participation to better informed investors with higher risk appetite.
Sebi’s proposal to double the minimum subscription amount is backed by a significant shift in the market. Since the original framework was introduced over 14 years ago, the Nifty50 and Sensex have grown around 4.5 times. To tighten the eligibility criteria, Sebi proposed that companies seeking to be listed on the stock exchange should have an operating profit (earnings before interest and taxes) of at least ₹3 crore in two of the previous three financial years. It also proposed to require that shares issued in IPOs have a nominal value of € ₹10 each for the issued capital and the proposed new shares.
Changes to the insider trading rules
The board is also expected to expand the definition of unpublished price sensitive information (UPSI) under the Prohibition of Insider Trading (PIT) Regulations. This includes restructuring plans, one-time bank settlements and other corporate decisions that could materially affect stock prices. Sebi’s proposal comes after a study found that companies often fail to classify all relevant business developments as UPSI, leading to gaps in compliance.
The regulator could consider its proposal to amend the definition of UPSI, and include regulation 30 of the Listing Obligations and Disclosure Requirements (LODR) in its consultation document. Regulation 30 of the LODR requires listed companies to disclose material events or information to the stock exchanges to ensure transparency and timely dissemination of information to investors.
To encourage more structured investments in startups, Sebi may approve a proposal to make sweeping changes in the regulatory framework for angel funds under alternative investment funds (AIFs). These include limiting investments to accredited investors, lowering the minimum investment per startup ₹25 lakhs ₹10 lakh, and halving the lock-in period from one year to six months.
Algo trading for private investors
On Monday, Mint reported that Sebi has introduced a landmark proposal to allow retail investors to participate in algorithmic (algo) trading – an area traditionally dominated by institutional players. With benefits such as faster trade execution, improved risk management and cost efficiency, algo trading has the potential to transform retail participation in the Indian capital markets.
Open for public feedback until January 3, 2025, the proposal emphasizes inclusivity while strengthening market integrity through stringent safeguards.
