SEBI publishes a consultation paper on FPIs' increased disclosures

31 May 2023 , 12:16 PM

In order to develop criteria for further public disclosures by foreign portfolio investors (FPIs) with assets under management (AUM) of more than Rs 25,000 crore in Indian equity, the Securities and Exchange Board of India (Sebi) released a consultation paper seeking public feedback on Wednesday.

Additionally, under the new regulations, high-risk FPIs that are currently in existence and have a concentration threshold of more than 50% in a single corporate group will also need to offer additional disclosure.

All funds would be regarded as high-risk offshore funds, with the exception of those held by the government, sovereign wealth funds, pension funds, and public retail funds, it was stated.

If additional disclosures aren’t made within three months after the event, the FPI will be forced to reduce its AUM to below the necessary Rs 25,000 crore level.

New FPIs that have recently started making investments will be permitted to surpass the 50% group concentration criteria for up to six months without having to make any further disclosures. Any violation by such FPIs of the 50% concentration criterion beyond six months will result in the need for additional disclosures.

This consultation document was created with the intention of protecting investors from potential MPS circumvention and potential FPI route abuse.

The FPI AUM of around Rs 2.6 lakh crore, as calculated by Sebi, may be classified as high-risk FPIs. This FPI AUM satisfies either the 50% group concentration or the Rs 25,000 crore fund size standards, according to the consultation paper, and represents less than 1% of the total stock market capitalization of India.

According to the consultation paper, ‘objectively identified high-risk FPIs’ with concentrated single group exposures and/or significant overall holdings in their India equity investment portfolio will need to make detailed disclosures about their ownership, economic interest in, and control under the new rules.

Only a small subset of ‘objectively identified’ high-risk FPIs with either considerable equity holdings or concentrated single-group equity exposures will be required to make more detailed disclosures, according to the consultation document.

For feedback and suggestions, write to us at [e-mail]