Markets regulator, Securities and Exchange Board of India (Sebi), has decided to ask for enhanced disclosures from a certain class of Foreign Portfolio Investors (FPIs). To ensure greater transparency it will mandate disclosures such as economic interests, ownership details and other granular details. These norms would be applicable for FPIs that concentrate holdings in a particular corporate group.
Sebi wants to bring about these changes in order to prevent possible circumvention of Minimum Public Shareholding (MPS) requirements and potential misuse of the FPI route. SEBI wants to ensure that there is no opportunistic takeover of Indian companies.
The regulator approved a proposal regarding the changes on Wednesday in a meeting.
Sebi stated that FPIs with concentrated holdings in a single group would have to provide details such as ownership, economic interest, and control rights on a full look–through basis. FPIs holding more than 50 per cent of their equity Asset Under Management (AUM) in a single corporate group or ones that hold more than Rs 25,000 crore in the Indian markets would be required to furnish such details.
However, certain entities such as government and government-related investors, pension funds and public retail funds, certain listed ETFs, corporate entities and verified pooled investment vehicles meeting certain conditions would be exempted from making these disclosures.
Applicants with investors contributing 25 per cent or more in the corpus, mentioned in the Sanctions List notified by the UN Security Council, are ineligible for registration as FPIs.
Sebi Chairperson Madhabi Puri Buch said that these norms have been decided based on the feedback from as many as 35 large players. The new FPI norms would come into effect as soon as in 3 months, and in 6 months for newcomers, confirmed SEBI Whole Time Member Anantha Narayan G.
Buch said that these norms were being worked on for the past 18 months or so but took time since they had to get approval from the Finance Ministry on the PMLA (Prevention of Money Laundering Act) rules.
The move also comes on the back of the Hindenburg Research allegations against the Adani conglomerate. It had said that certain FPIs held a significant stake in listed Adani Group companies, something that the conglomerate denied. Sebi could not identify the beneficial owners of some FPIs in Adani stocks.
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