Regulatory Updates #19: SEBI on protection fund, e-commerce in insurance & more

Bar & Bench will bring to you the latest regulatory and policy updates from different ministries and regulatory authorities. In this edition of the Bar & Bench Regulatory Updates, we analyse the latest circulars issued by the Securities and Exchange Board of India (SEBI), draft guidelines on insurance e-commerce and more..SEBI issues guidelines for Depositories’ protection fund.SEBI has issued a circular prescribing new norms with respect to constitution, management and utilisation of the Investor Protection Fund (IPF)..At present, National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) are the two depositories in the country..For the constitution and management of the IPF, every depository has to create a dedicated trust, which will consist of at least one public interest director of the depository, one person of eminence from an academic institution from the field of finance/ an expert in the field of investor education/ a representative from the registered investor associations recognised by SEBI, and the managing director of the depository..SEBI has asked depositories to, inter alia, credit 5 % of their annual profits, and all fines and penalties recovered from depository participants to the IPF. Further, the utilisation of these funds has also been outlined. Depositories are required to use the funds for promoting investor education and awareness, and assistance of research activities. In this regard, SEBI has also laid down the instruments in which the IPF funds can be invested..The Depositories have been asked to implement the provisions within three months of the issuance of this circular and submit with SEBI, within thirty days, with internal guidelines on utilisation of funds..SEBI tightens norms on P-notes.In furtherance of the SEBI Board meeting which was held in May, among other changes, the know-your-client (KYC) norms for offshore derivate instruments (ODI), commonly known as P-Notes, have been tightened. The key features are of the circular are:.Bringing in uniformity, subscribers will now be subjected to the same Know Your Client (KYC) requirements as domestic investors instead of KYC norms of the jurisdiction of the beneficial owner.Applicability of ‘Prevention of Money-laundering’ standards. Issuer must identify subscribers who hold in excess of (i) 25% in the case of a company and; (ii) 15% in case of partnership firms/trusts/unincorporated entities.Prior permission required by subscriber to transfer ODI to another offshore investor and, all intermediate transfers during the month to be recorded and reported.Issuers required to file suspicious transaction reports with the Indian Financial Intelligence Unit (FIU) and, carry out periodical review.E-biz portal integrates 20 central government services.In another attempt to improve the ease of doing business, as many as twenty central government services, also know as government-to-business (G2B) services have been integrated with the e-Biz platform. Several states such as Andhra Pradesh and Odisha are listing various services as well on the platform. The portal is expected to expand to over 200 G2B services in the next seven years..India signs to Europe’s anti corruption plan.India has acceded to another global measure aimed at ‘clamping down’ tax evasion by joining a group of nearly 40 nations that have signed a Europe-led clampdown on tax evasion and corruption. This is an initiative which aims to develop a global standard for the automatic exchange of beneficial ownership data between law enforcement agencies and tax authorities of partner countries..As a result, everyone in the world will be able to see who really owns and controls each and every company in these countries..Draft guideline for buying insurance products online.In a move that could potentially revolutionise the insurance sector, the Insurance Regulatory and Developmental Authority of India issued draft guidelines which will allow insurance companies to provide aggregated advisory services and insurance products through online platforms..The regulations propose setting up of an ‘insurance self-network platform’ which will be a technology based platform (website or mobile app) with defined & regulated participants such as insurers, intermediaries, agents etc..The digitisation of insurance products and services will help bring the prices down by eliminating the physical infrastructure requirements..While the proposal is being seen as one which will deepen the penetration in the market, the requirement of having an e-insurance account for transacting is also being seen as a deterrent by many.