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SEBI Paper Proposes Additional Disclosure Mandates for High-risk FPIs

SEBI proposed changes to the disclosure norms for high-risk FPIs.

The Securities and Exchange Board of India (SEBI) released a consultation paper on May 31 proposing changes to the disclosure norms for high-risk Foreign Portfolio Investors (FPI) to prevent violation of  Minimum Public Shareholding (MPS) rules and to guard against possible misuse of the FPI route. 

Under the new proposed norms, SEBI will mandate certain high-risk FPIs to disclose ownership details down to the level of natural persons, public retail funds or large public listed entities unconstrained by any materiality thresholds set by the Prevention of Money Laundering Act (PMLA) or secrecy laws applicable in other jurisdictions.

However, some threshold relaxation has been proposed for global entities with higher AUMs and newly-established FPIs for the first six months.

The SEBI paper has mandated only a limited number of objectively identified high-risk FPIs 

with either concentrated single-group exposures or significant overall holdings in their Indian equity investment portfolio to provide additional disclosures around the economic interest in and the control and ownership of such funds.

Government and related entities, such as central banks and sovereign wealth funds, have been categorised as low-risk, while pension funds and public retail funds have been defined as moderate-risk FPIs. All FPIs that do not fulfil the above criteria are classified as high-risk FPIs.

High-risk FPIs with an overall holding in Indian equity markets of over Rs 25,000 crore would be required to comply with the additional disclosure requirements within six months or, upon failure, should bring down their AUM under Rs 25,000 crore within the same time frame.

Any high-risk FPIs holding over 50 per cent of their equity asset under management (AUM) in a single corporate group will be provided six months to bring down their exposure before additional disclosures are mandated.

The regulator has sought public comments on the proposal by June 20.

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