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Regulatory Updates
I. SEBI UPDATES
SEBI Master Circular on Securities Market Surveillance 2026: Key Compliance Changes for Listed Companies, Intermediaries and MIIs
The Securities and Exchange Board of India (“SEBI”) has issued an updated Master Circular consolidating various circulars and regulatory instructions relating to securities market surveillance.
The circular brings together provisions governing insider trading compliance, trading window restrictions, disclosure requirements, system-driven disclosures, and the surveillance obligations of Market Infrastructure Institutions (“MIIs”), while superseding earlier surveillance-related circulars.
The Master Circular incorporates several recent regulatory developments, including the framework for financial disincentives for surveillance-related lapses by MIIs, the clarification permitting subscription to Non-Convertible Securities during trading window closure periods subject to applicable conditions, and the extension of automated trading window closure restrictions to immediate relatives of Designated Persons under the SEBI (Prohibition of Insider Trading) Regulations, 2015.
The circular also strengthens compliance requirements by mandating robust surveillance and monitoring systems for stock exchanges, depositories, intermediaries, listed entities, and fiduciaries. Further, it consolidates the PAN-ISIN freeze mechanism, system-driven disclosures, and standardized disclosure formats to strengthen insider trading controls and market integrity.
Conclusion
The Master Circular serves as a comprehensive consolidation of SEBI's surveillance framework and reinforces regulatory expectations relating to market monitoring, insider trading compliance, and governance standards across the securities market ecosystem.
Permitted Use of Fresh Borrowings by InvITs Where Net Borrowings Exceed 49% of Asset Value
SEBI has issued a circular1 specifying the permissible uses of fresh borrowings by Infrastructure Investment Trusts (“InvITs”) where total net borrowings exceed 49% of the value of InvIT assets. The circular follows the amendment to Regulation 20(3)(b)(ii) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 empowering SEBI to prescribe the end-use of such borrowings.
Under the revised framework, borrowings above the 49% threshold may be utilized for capital expenditure aimed at enhancing asset performance or capacity augmentation. Such borrowings may also be used for major, non-routine maintenance expenditure relating to Road Projects falling within the “Roads and Bridges” sub-sector, provided such expenditure is aligned with the applicable concession agreement.
The circular further permits refinancing of existing debt of the InvIT, its Holdco, or SPV, subject to the condition that the original borrowing was incurred for permissible purposes and that refinancing is restricted to the principal outstanding amount, excluding accrued interest, fees, penalties, or other charges.
Conclusion
The circular provides much-needed clarity on the deployment of borrowings by highly leveraged InvITs and balances operational flexibility with investor protection and prudent leverage management.
Status of SPVs Following Conclusion or Termination of Concession Agreements
SEBI has issued a circular2 clarifying the status of Special Purpose Vehicles (“SPVs”) held by Infrastr-ucture Investment Trusts (“InvITs”) following the conclusion or termination of concession agreements or similar infrastructure contracts.
The circular provides that such conclusion or termination will not automatically result in the entity ceasing to qualify as an SPV, provided specified conditions are satisfied. The Investment Manager is required, within one year, to either exit the SPV through sale, liquidation, winding-up, merger, or a similar mechanism, or acquire a new infrastructure project through the SPV. The one-year period is calculated from the latest of the completion or termination of the concession agreement, resolution of pending claims and litigations, or expiry of the applicable defect liability period.
The circular also prescribes enhanced annual disclosure requirements regarding such SPVs, including details of investments, liabilities, contingent obligations, project status, and proposed exit strategies.
Conclusion
The framework provides regulatory certainty regarding post-concession SPVs and seeks to facilitate orderly exits while ensuring transparency for investors.
Revision of Monthly Cumulative Report (MCR) Format
SEBI has revised the format of the Monthly Cumulative Report (“MCR”)3 applicable to mutual funds with effect from reporting periods comm-encing June 2026. The revision follows the intro-duction of new scheme categories under SEBI's mutual fund categorisation framework.
To align reporting requirements with these developments, SEBI has introduced a revised MCR format under Annexure A and a separate reporting format for Specialized Investment Funds (“SIFs”) under Annexure B.
The revised formats require enhanced reporting of assets under management, net inflows and outflows, Net Asset Value (“NAV”), Average Assets Under Management (“AAUM”), and detailed Systematic Investment Plan (“SIP”) metrics, including new registrations, maturities, closures, and outstanding accounts.
Conclusion
The revised reporting framework enhances transparency and provides SEBI with more granular operational data while aligning mutual fund reporting requirements with the updated scheme categorisation regime.
Ease of Doing Investments: Modified Norms for Nomination in Demat Accounts and Mutual Fund Folios
SEBI has modified the nomination framework applicable to demat accounts and mutual fund folios with the objective of simplifying investor onboarding and reducing the incidence of unclaimed assets.4
Under the revised framework, individual investors are no longer required to provide a nomination or opt-out declaration as a mandatory condition for opening or operating a demat account or mutual fund folio. For jointly held accounts, an opt-out declaration may be executed by the primary holder, provided appropriate authorisation has been obtained from the remaining joint holders.
The circular also removes the requirement for witness signatures and thumb impressions on nomination forms except where the account holder executes the form through a thumb impression. Further, SEBI has introduced standardised nomination and opt-out forms for use across the securities market ecosystem.
Conclusion
The revised framework simplifies procedural requirements for investors while maintaining safeguards relating to transmission of securities and mutual fund holdings.
SEBI Master Circular for Alternative Investment Funds (AIFs)
SEBI has issued a comprehensive Master Circular5 for Alternative Investment Funds (“AIFs”), consolidating operational, regulatory, and compliance-related directions issued up to May 31, 2026. The Master Circular supersedes the earlier AIF Master Circular dated May 7, 2024 and serves as a single reference point for all applicable regulatory requirements.
The circular consolidates provisions relating to Angel Funds, Large Value Funds for Accredited Investors, reporting and disclosure obligations, compliance officer certification requirements, and various other operational and compliance frameworks applicable to AIFs.
SEBI has clarified that the rescission of earlier circulars will not affect actions already taken, approvals granted, obligations incurred, or compliance measures implemented under such circulars.
Conclusion
While the Master Circular does not introduce significant new compliance obligations, it substantially improves accessibility and ease of reference for AIFs and other market participants by consolidating the existing regulatory framework into a single document.
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Footnotes
1. https://www.sebi.gov.in/legal/circulars/may-2026/permitted-use-of-freshborrowings-for-invits-where-net-borrowings-exceeds-forty-nine-percent-of-thevalue-of-invit-assets_101465.html
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