Market Regulator SEBI To Analyse Key Proposals On SME IPOs, Angel Funds & Algo Trading Today; Check

The Securities and Exchange Board of India (Sebi) is poised to introduce changes across the securities market during its board meeting on December 18. The proposed reforms aim to impact small and medium enterprises (SMEs), angel funds, and retail investors, with potential ripple effects across IPO regulations, insider trading rules, and algorithmic trading.

Boosting SME IPO Eligibility
One of the most anticipated updates involves overhauling the rules governing SME initial public offerings (IPOs). Sebi is likely to double the minimum application size for such IPOs from Rs 1 lakh to Rs 2-4 lakh. This move aims to attract well-informed investors with a greater risk appetite.

This proposal comes as a response to the evolution of Indian capital markets since the SME IPO framework was first introduced over 14 years ago. With indices like the Nifty50 and Sensex growing 4.5 times during this period, the SME IPO ecosystem demands tighter regulatory criteria. Sebi has suggested mandating that SMEs seeking public listing should demonstrate an operating profit of at least Rs 3 crore in two of the last three financial years. Furthermore, IPO-bound companies may be required to issue shares with a face value of Rs 10 each for their issued capital.

Insider Trading Rules
Sebi is also expected to address insider trading loopholes by expanding the definition of unpublished price-sensitive information (UPSI). The regulator intends to include key corporate decisions such as restructuring plans, one-time bank settlements, and other developments with a potential material impact on stock prices under the scope of UPSI.

This expansion comes after studies revealed that companies often fail to classify all relevant corporate developments as UPSI, leading to gaps in compliance. The changes would align UPSI definitions with Regulation 30 of the listing obligations and disclosure requirements (LODR). LODR mandates companies to disclose material events and information.

Angel Investments in Startups
Sebi plans to revamp regulations governing angel funds under alternative investment funds (AIFs). The proposals include limiting investments to accredited investors, reducing the minimum investment per startup from Rs 25 lakh to Rs 10 lakh, and shortening the lock-in period for investments from one year to six months.

Retail Investors
Sebi has proposed allowing retail investors to participate in algorithmic (algo) trading, a domain previously dominated by institutional investors. Algo Trading leverages automated programs to execute trades at high speeds, offering advantages such as faster trade execution, enhanced risk management, and cost efficiency.

Sebi's proposal, which is open for public feedback until January 3, 2025, seeks to democratize access to this high-tech trading tool while implementing stringent safeguards to ensure market integrity.