The Securities and Exchange Board of India (Sebi) is starting to draw to a close the relaxation measures adopted during the peak of covid-induced lockdown, as it attempts to bring normalcy back to the markets, two officials aware of the development said.

With lesser restriction in the Unlock 4.0 phase, the market regulator feels it’s reasonable to phase out the measures adopted to ease compliance and curb volatility.

To put it in perspective, Sebi’s reluctance to extend the new margin norms may be noteworthy. As per these norms, a client’s securities would not be considered as margin, and the client would need to pledge their securities after authorisation with the broker. The norms were to come into effect from 1 June, but the deadline was extended twice in view of the pandemic, first to 1 August and then 1 September. When brokers approached Sebi for a third extension citing incomplete back-end work due to the pandemic, the regulator refused.

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“As soon as the new margin framework settles down, Sebi will consider removing the emergency steps of enhanced margins for highly volatile stocks, reduced market-wide position limits for volatile scrips and curbs on short-selling," said one of the two people cited above, requesting anonymity.

Since the pandemic broke out in India, the Sebi has issued over 40 circulars relaxing rules -- Companies got extra time to file quarterly results and conduct annual general meetings; brokers and trading members got relaxations on maintaining call data records of clients; and mutual fund houses got more time for compliance, among others. Sebi also granted a one-time extension to the validity of public offer filings.

“All these measures were taken bearing in mind the hardships brought about by covid-19. But now, when the companies have settled in the new normal, and India is no longer under a strict lockdown, Sebi is considering to ease these relaxations in a phased manner. This is to avoid any sudden disruptions and also to bring normalcy into the markets," the second person said.

It may be recalled, on 31 August Sebi withdrew document processing relaxations for foreign portfolio investors (FPIs) from jurisdictions. It also decided to implement system-driven disclosures for members of promoter group, directors and designated persons of a listed company. These disclosures pertain to trading in equity shares and equity derivatives of the company. The idea was first proposed in December 2015, and its implementation now signals Sebi's confidence that the worst of the market disruption is behind.

On 8 September, exchanges and depositories in a joint statement said the new pledge system was working and pledges were being created seamlessly. Sebi wants to phase out the increased surveillance and regulatory measures.

Sebi will be guided by Ministry of Corporate Affairs (MCA) relaxations for companies on AGMs and earnings filing timelines, the first person added.

MCA, in a recent notification, allowed companies to conduct their AGMs for financial 2020 till the end of this year. Most NSE 500 companies have already announced their AGM dates or have conducted AGMs, and the relaxation would help smaller companies.

“As the time passes and companies settle down with the operations, some of these one-time relaxations may gradually be phased off, and may no longer be required. However, certain provisions such as permissibility of virtual meetings etc. may have continuing benefits for the companies and Sebi should consider continuing with such options even after covid-19," said Madhu Sudan Kankani, assurance partner, Deloitte India.