Latest from the REGULATOR

Government allows direct listing of securities by Public Indian companies on International Exchanges of GIFT IFSC

In pursuance of the announcement on July 28, 2023 by Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman to enable direct listing of Indian Companies at GIFT- IFSC exchanges in the first phase, the Department of Economic Affairs (DEA), Ministry of Finance, has amended the Foreign Exchange Management (Non debt Instruments) Rules, 2019. Simultaneously, the Ministry of Corporate Affairs (MCA) has issued Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024. These, together, provide an overarching regulatory framework to enable Public Indian companies to issue and list their shares in permitted international exchanges.

(1.) As of now, the framework allows Unlisted Public Indian companies to list their shares on an international exchange.
(2.) SEBI is in the process of issuing the operational guidelines for Listed Public Indian companies.

The international stock exchanges at GIFT-IFSC under the regulatory supervision of International Financial Services Centres Authority (IFSCA) i.e., India International Exchange and NSE International Exchange have been currently prescribed as permitted stock exchanges under the Rules and the Scheme.

This policy initiative, to enable listing of Indian companies in GIFT-IFSC, will help with following:

(1.) Reshape the Indian capital market landscape and offer Indian companies, especially start-ups and companies in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges.
(2.) It is expected to lead to better valuation of Indian companies in line with global standards of scale and performance, boost foreign investment flows, unlock growth opportunities and broaden the investor base.
(3.) The public Indian companies will have the flexibility to access both markets i.e. domestic market for raising capital in INR and the international market at IFSC for raising capital in foreign currency from the global investors.
(4.) This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets.
(5) It is also expected to provide a boost to the capital market ecosystem at GIFT IFSC by provision of new investment opportunities for investors, diversification of financial products and by enhancing liquidity.

ASCI introduces Guidelines to curb Greenwashing in Ads

The Advertising Standards Council of India (ASCI) has introduced guidelines for adver tisements making environmental claims, which will be effective on February 15, 2024. The guidelines are intended to prevent misleading environmental claims, also known as greenwashing.

Here are some guidelines for advertisements making environ-mental claims:

(1.) Claims must be substantiated: Absolute claims such as but not limited to “environment friendly”, “eco friendly”, “sustainable”, “planet friendly” that imply that the product advertised has no impact or only a positive impact must be supported by a high level of substantiation. Comparative claims such as "greener" or "friendlier" can be justified.
(2.) Claims must be based on the full life cycle: Environmental claims should cover the entire life cycle of the product or service, unless the ad specifies differently and explains the life cycle limits. If a broad claim isn't supportable, a narrower claim about certain aspects may be acceptable. Claims based on just a part of the life cycle must not mislead about the overall environmental impact.
(3.) Claims must be specific: Unless it is clear from the context, an environmental claim should specify whether it refers to the product, the product's packaging, a service, or just to a portion of the product, package, or service.
(4.) Claims must not mislead consumers: Advertisements must not mislead consumers about the environmental benefit that a product or service offers by highlighting the absence of an environmentally damaging ingredient if that ingredient is not usually found in competing products or services by highlighting an environmental benefit that results from a legal obligation if competing products are subject to the same requirements.
(5.) Claims with certifications and seals: Certifications and Seals of Approval should make clear which attributes of the product or service have been evaluated by the certifier, and the basis of such certification provided. Certifications and Seals used in an advertisement should be from a Nationally/ Internationally recognised certifying authority.
(6.) Claims with indirect communication: Visual elements in an ad should not give a false impression about the product/service being advertised. For example, logos representing a recycling process on packaging and/or in advertising material can significantly influence a consumer's impression.
(7.) Aspirational claims: Advertisers should refrain from making aspirational claims about future environmental objectives unless they have developed clear and actionable plans detailing how those objectives will be achieved.
(8.) Claims regarding carbon offsets: For carbon-offset claims, advertisers should clearly, and prominently disclose if the carbon offset represents emission reductions that will not occur for two years or longer. Ads should not claim directly or by implication that a carbon offset represents an emission reduction if the reduction, or the activity that caused the reduction, was required by law.

RBI issues draft framework for FinTech Self-Regulatory Organisations (SROs)

The Reserve Bank of India has issued a draft framework for Self-Regulatory Organisations (SRO) focused on the FinTech sector. The main idea behind the guidelines is to empower this growing sector to function and innovate responsibly even in the absence of formal regulations. The SRO-FT should play a crucial role in promoting responsible innovation by providing a framework that encourages responsible experimentation. Under the guidance and oversight of RBI, SRO-FT will be able to enhance a regulatory compliance culture among FinTechs and build capacities of the sectoral players.

According to the draft rules, the following characteristics for SRO-FT were highlighted:

(1.) True Representative of the FinTech Sector
(2.) Development-oriented
(3.) Independence from Influence
(4.) Legitimate Arbiter of Disputes
(5.) Encouraging Members for Adherence to Regulatory Priorities
(6.) Repository of Information

The draft framework has also laid down the characteristics of a FinTech SRO, including functions, governance standards, and eligibility and membership criteria. The draft framework is open for feedback from stakeholders and members of the public until the end of February 2024.

SEBI extends deadline for listed companies to confirm or deny market rumours for the second time

The capital markets regulator, Securities and Exchange Board of India (SEBI), extended the deadline for the implementation of rules related to mandatory confirmation or denial of market rumours by the top 100 listed companies.

(1.) The deadline has been extended for the top 100 listed companies by market capitalisation to June 1, 2024 from February 1, 2024.
(2.) For the top 250 listed entities, the rule will kick in on December 1, 2024, up from the current requirement of August 1, 2024.

As per the disclosure requirements, these companies will have to "confirm, deny, or clarify any reported event or information in the mainstream media, that is not general in nature and which indicates that rumours of an impending specific material event" are circulating amongst the investing public within 24 hours from the reporting of the information. The regulators stated that the decision to extend the timeline for implementing LODR rules has been taken due to ongoing industry-standard finalisation and required amendments to market norms.

The rule is aimed at strengthening the corporate governance of listed entities.