SEBI on August 24, 2023 has mandated additional disclosures by Foreign Portfolio Investors (FPIs). The SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2023 outline the criteria rendering FPIs liable to provide detailed information about individuals and entities associated with them. While the broad principles are outlined, the finer details will be delineated in a Standard Operating Procedure (SOP) to be established in consultation with SEBI.
The criteria for submitting disclosures by FPIs include instances such as FPIs holding more than 50% of their Indian equity Assets Under Management (AUM) in a single Indian corporate group, or FPIs holding more than INR 25,000 crore of equity AUM in the Indian markets individually or within their investor group. These criteria ensure that entities with significant economic interests or control are identified, leading to a more transparent and secure investment landscape.
However, recognizing that some FPIs might not pose significant systemic risk and certain genuine circumstances might hinder strict adherence to these criteria, the amendments offer exemptions. Government and government-related investors, Public Retail Funds, Exchange-Traded Funds, and other specified entities fall under this category. Additionally, pooled investment vehicles with specific characteristics are also exempted.
Timing is of the essence when it comes to compliance. FPIs exceeding the prescribed thresholds have specific timelines within which they must realign their investments or make necessary disclosures. Failure to do so can lead to the suspension of further equity purchases and even invalidation of their FPI registration.
