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SEBI Tightens Disclosure and Ownership Norms for Foreign Portfolio Investors

The Securities and Exchange Board of India (SEBI) has introduced stricter norms for foreign portfolio investors (FPIs) to enhance transparency and prevent potential misuse of the FPI route. The new rules require FPIs to provide more detailed disclosures regarding ownership and economic interest.

The enhanced disclosure requirements apply to FPIs that hold more than 50% of their Indian equity assets under management (AUM) in a single Indian corporate group. They also apply to FPIs that, individually or along with their investor group, hold equity AUM worth more than Rs 25,000 crore in the Indian markets.

However, SEBI has exempted certain entities from these additional disclosure requirements. These include government and government-related investors, pension funds, public retail funds, certain listed exchange-traded funds (ETFs), corporate entities, and verified pooled investment vehicles that meet specific conditions.

The new norms aim to guard against circumvention of rules such as the requirement for Minimum Public Shareholding (MPS) or disclosures under Substantial Acquisition of Shares and Takeovers Regulations 2011 (SAST). They also aim to prevent potential misuse of the FPI route.

SEBI’s board has also approved changes for aligning the eligibility criteria in regulations with the reduced threshold prescribed under the Prevention of Money Laundering (PML) rule.

The introduction of these stricter norms reflects SEBI’s commitment to maintaining the integrity of India’s financial markets. By requiring more detailed disclosures from FPIs, SEBI aims to enhance transparency and ensure that foreign investments in India’s markets are in line with the country’s regulatory requirements.

Written by Neelesh