The Securities and Exchange Board of India (Sebi) on Wednesday tightened the disclosure rules for foreign portfolio investors (FPIs) for possible circumvention of the Minimum Public Shareholding (MPS) requirement.

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The new provisions for additional disclosures from FPIs come after the Sebi could not identify the beneficial owners of some foreign portfolio investments in Adani stocks since the existing regulations are lax in identifying the true owners of many investments.

The watchdog will enhance disclosure requirements for FPIs, including mandating additional granular-level disclosures regarding ownership, economic interest, and control of objectively identified FPIs meeting certain criteria and conditions.

If FPIs holding more than 50 percent of their Indian equity Asset Under Management (AUM) in a single Indian corporate group or FPIs that individually, or along with their investor group hold more than Rs 25,000 crore of equity AUM in the Indian markets, are required to provide additional disclosures.

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However, certain entities are exempted from making such additional disclosures, which include government and government-related investors, pension funds and public retail funds, certain listed ETFs, corporate entities, and verified pooled investment vehicles meeting certain conditions.

Further, applicants with investors contributing 25 percent or more in the corpus that are mentioned in the Sanctions List notified by UN Security Council are ineligible for registration as FPIs.

In March 2023, PML Rules requirements for the identification of beneficiaries were amended and currently stand at 10 percent for companies and trusts and 15 percent for partnerships and unincorporated associations or body of individuals.

The Sebi board also approved changes to the FPI Regulations for aligning these eligibility criteria in the Regulations with the reduced threshold prescribed under PML Rules.

A Sebi data showed that FPI assets under management of only about Rs 2.6 lakh crore — around six percent of the total FPI equity AUM and less than one percent of India's total equity market capitalisation — may potentially be identified as high-risk FPIs.

First Published:Jun 28, 2023 9:33 PM IST