Sebi revamps accredited investors framework; approves common ad code for mkt intermediaries
24 Sept, 23:05 IST · Plays out over weeks · 1 source
SEBI widened the accredited-investor definition and clarified ad rules, modestly helping exchanges, depositories and brokers while insurers, lenders and banks see no real change.
Key facts
What the reporting establishes, before any reading of it.
- SEBI widened accredited investor definition with new asset criteria for individuals and corporates
- Board approved common advertisement code allowing celebrity brand endorsements but restricting specific product ads
- Introduced new settlement scheme for non-genuine trades in illiquid stock options
- Changes aim to simplify accreditation and encourage listing of non-convertible debt securities
How the news spreads
Step by step — from the first companies it hits to whole sectors.
Who it hits first
- India's market regulator SEBI widened who can qualify as an accredited investor, so more wealthy individuals and companies can buy special products like private funds and company bonds.
- SEBI also approved one common advertising rule for stock-market brokers and agents that allows celebrity brand ads while keeping strict limits on ads for specific products.
- A new settlement plan for old sham trades in illiquid stock options should help close long-pending cases and clean up that corner of the market.
Who may gain
- BSE Limited, which runs the stock exchange - more eligible investors and bond listings should lift trading and listing fees.
- Central Depository Services (India) Limited, which keeps investor shares in electronic accounts - more big investors should mean more account openings.
- Multi Commodity Exchange of India, which runs the commodity futures exchange - a bigger sophisticated-trader pool can support trading volumes.
- Billionbrains Garage Ventures, which runs the Groww retail brokerage app - clearer brand ads and more eligible clients should help account growth.
- Anand Rathi, the wealth manager and broker for rich clients - a wider accredited definition directly grows its target clients.
- KFintech, which does transfer-agency and back-office work for funds - more fund investors should mean more folios to service.
- CAMS, which does transfer-agency and back-office work for mutual funds - more wealthy fund investors should lift folio counts.
Along the supply chain
Downstream
Downstream, the stock exchange and the share depository pass services to retail brokers such as the Groww app, wealth managers such as Anand Rathi, fund transfer agents such as KFintech and CAMS, and the commodity futures exchange, which all serve the newly eligible wealthy investors.
Upstream
Upstream, there is no factory-style supply chain, but BSE Limited, which runs the stock exchange, relies on Central Depository Services, which keeps shares in electronic form, for settlement support and on IRIS, the software firm that supplies reporting tools to the exchange, so both should see slightly more processing work.
Where demand moves
Business
More people and firms qualify as accredited investors, so demand rises for private funds, portfolio-management services and listed company bonds, which in turn means more stock-exchange trades, more electronic share accounts with the depository, more fund folios for transfer agents, and more client openings for retail brokers and wealth managers.
Capital
Investors are likely to bid up shares of market-infrastructure firms such as the stock exchange, the share depository, the commodity exchange, fund transfer agents and retail brokers, while money does not move toward insurers, banks or lenders on this news.
How it spreads across sectors
Financial Services
Positive for market-infrastructure and broker stocks as a wider accredited base should lift trading, account openings and fee income, while insurers, banks and lenders see little change.
Information Technology
Slightly positive for the small reporting-software supplier to the exchange, which should see a little more compliance and onboarding work.
When it plays out
Immediate
In the first week, shares of the stock exchange, the depository and brokers may see a small sentiment lift as traders price in higher volumes.
Medium term
Over the next few months, more company-bond listings and private-fund launches should build up, with the options-settlement plan helping clear old cases.
Short term
Over the next few weeks, brokers and wealth managers should start signing up newly eligible wealthy clients and adjust ads to the new common code.