The Securities and Exchange Board of India has tightened disclosure requirements for foreign portfolio investors (FPIs) amid growing suspicions that some of them have been skirting regulations on minimum public shareholding in listed companies by using opaque structures to conceal the identities of beneficial owners of the funds they funnel into Indian stock markets.
The market regulator has unveiled new rules under which they will have to submit granular level details on ownership and economic interest and waive privacy rights granted to them in certain jurisdictions that bar such disclosures.
The move to tighten FPI disclosure rules comes amid an ongoing investigation into accusations levelled by US short-seller Hindenburg Research against the Adani group that it connived with certain FPIs to dodge minimum public shareholding regulations in several listed entities.
At its meeting here on Wednesday, the Sebi board approved a new set of disclosure rules for FPIs that have concentrated single group exposures or significant equity holdings.
Such FPIs would be required to provide granular level disclosures regarding ownership, economic interest, and control rights on a full look–through basis, the regulator said in a release.
The regulator said that FPIs holding more than 50 per cent of their equity Asset Under Management (AUM) in a single corporate groupor FPIs that individually, or along with their investor group hold more than Rs 25,000 crore in the Indian markets would be required to comply with the new requirements.
Briefing reporters after the board meeting, Sebi chairperson Madhabi Puri Buch said the changes in norms related to FPI disclosures have been decided, based on the feedback from as many as 35 largeplayers.
Sebi whole time member Anantha Narayan G said the new FPI norms to come to effect in three months for those already here and for new comers in six months.
When asked about the impact on the market in case some of those FPIs refuse to make more disclosures, he said those FPIs which will have to make more disclosures collectively own equities worth under 1 per cent of the BSE market capitalisation.
On the delay in bringing out these norms, Buch said this was being worked on for the past 18 months or so but took time as it had to get the nod from the finance ministry on the PMLA (Prevention of Money Laundering Act) rules which in turn are based on the FATF (Financial Action Task Force) rules.