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Informist, Tuesday, Apr. 1, 2025

 

--SC sends PIL seeking disclosure of portfolio holding of AIF, FPI to SEBI 

 

NEW DELHI – The Supreme Court on Tuesday asked petitioner Trinamool Congress leader Mahua Moitra to move her representation to Securities and Exchange Board of India on her public interest litigation seeking transparency and investor awareness in financial markets. In her plea, Moitra sought transparency in financial markets by mandating public disclosure of ultimate beneficial owners details as well as portfolio holdings of alternative investment funds and foreign portfolio investors.

 

The apex court said that once a representation is made to the market regulator, it shall be considered by them according to the law. 

 

The petitioner said that the rapid expansion of alternative investment funds and foreign portfolio investors in India's financial markets has given rise to serious transparency concerns. Unlike mutual funds, which are subject to stringent public disclosure norms, alternative investment funds and foreign portfolio investors operate under opaque structures, raising risks of market manipulation, money laundering, and tax evasion, said the petitioner.

 

The petition stated that the number of alternative investment funds registered with SEBI has increased over 30 times from 42 as on Mar. 31, 2013 to over 1,528 as on Mar. 9, 2025. The average asset under management of alternative investment funds has increased over 835 times from INR 14.37 billion as on Mar. 31, 2013 to almost INR 13 trillion as on Dec. 31, 2024, the petitioner stated. 

 

The current assets under custody of registered foreign portfolio investors in India as on Jan. 31 are over INR 74 trillion, said the petition. In contrast, the total assets under management of mutual funds in India is only close to INR 68 trillion as on Jan. 31, the petitioner added. "However, while mutual funds (known as 'Collective Investment Schemes') are subjected to strict public disclosure norms (under SEBI Mutual Fund Regulations 1996 & SEBI Collective Investment Scheme (CIS) Regulation 1999, etc.), there are virtually no public disclosure norms for both AIFs as well as FPIs in India," said the petition.

 

The lack of public disclosure norms on alternative investment funds and foreign portfolio investors poses severe risks to financial stability, market integrity, and economic sovereignty, said Moitra. Furthermore, with increasing foreign investment into the Indian market, the absence of transparent ultimate beneficial owners disclosure norms raises concerns over possible money laundering, including round tripping of funds, front running, circular running, green washing, channel tripping, and tax evasion and market manipulation, said the petitioner.

 

Given the increasing role of alternative investment funds and foreign portfolio investors in India's financial markets, regulatory transparency is crucial to protect the interest of market stakeholders, especially the retail investor, ensuring market stability and preventing financial malpractices through circumvention of the law, said the petitioner.  End

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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