SEBI has once again changed some of the rules regarding the stock market. Stock market regulator SEBI has proposed that all payments such as dividends, interest, etc. of listed companies should be made only through electronic means. This new rule by SEBI is to make the payment process more convenient for investors. It is also imperative to improve security and convenience.
SEBI’s current LODR rules allow electronic payments, but if electronic payments fail, cheques or warrants are also allowed. Especially for amounts above Rs 1500. However, it has now been proposed to allow payments only through electronic means, which will further increase the safety of investors.
Why is there a problem with payment?
SEBI said when the bank details of equity holders are incorrect or unavailable, payments may not be made and companies need to send cheques. The latest data showed that the failure rate of electronic dividend payments for the top 200 listed companies was 1.29%. SEBI in its consultation paper proposed to make all payments including dividend and interest in electronic form to shareholders holding shares in Demat and in physical form.
This announcement is for mutual funds
SEBI has also changed the rules for mutual funds. SEBI has allowed mutual funds to buy and sell credit default swaps (CDS). The goal is to increase liquidity in the corporate bond market. This flexibility to participate in CDS will be available as an additional investment product for mutual funds, SEBI said in a circular.
What is a credit default swap?
In stock market terms, a credit default swap is like an insurance contract that provides protection if a borrower defaults. This helps CDS manage a mutual fund’s debt-equity risk. When a mutual fund buys a CDS, it pays a premium to the seller in exchange for protection in the event that a particular bond defaults.
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