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Informist, Tuesday, Jul 30, 2024

MUMBAI – The Securities and Exchange Board of India board today proposed, in a public consultation paper, relaxation of stringent disclosure norms for select high-risk foreign portfolio investors. The main proposal is aimed at linking the disclosure requirements "to an appropriate minimum threshold of disclosure for identification and categorization of an FPI as an LBC (land bordering country) or non-LBC entity."

In August 2023, SEBI introduced rules for FPIs which fulfilled certain criteria to disclose granular details of all entities holding any ownership, economic interest, or control in an FPI, on a full look-through basis. The enhanced disclosures applied to an FPI having more than 50% of their India equity assets in a single Indian corporate group. This was the concentration criteria.

There was also a size criterion where the enhanced disclosures applied to an FPI which individually, or along with its investor group, held more than 250 bln rupees of equity assets in the Indian market. In its consultation paper today, SEBI said that additional disclosures by FPIs breaching the size criteria were prescribed with a view to identify and categorise them as land bordering country and non-land bordering country entities, for further monitoring by government authorities. According to analysts, SEBI's August 2023 measures were meant to monitor investments from Chinese entities through the FPI route.

SEBI said that such an objective could also be achieved by prescribing risk-based threshold of disclosure of investors and stakeholders "rather than mandating disclosure of each and every interest owner in the fund." With respect to FPIs meeting the size criteria, the SEBI paper stated that no further granular disclosures shall be required for an FPI if the entities which owned, controlled, held economic interest in over 50% of the FPI's assets were from land bordering countries. But such an FPI will be categorised as land bordering country entity.

The SEBI paper also stated that an FPI will get categorised as a non-land bordering country entity if the entities owning, controlling, or holding economic interest in more than 67% of its assets are from non-land bordering countries. Such FPIs will also be exempt from additional and granular disclosures. The rest of the FPIs which meet the size criteria will have to continue complying with the additional and granular disclosures mandated by SEBI in its August 2023 circular, the paper stated.  End

Reported by Rajesh Gajra

Edited by Ashish Shirke

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