The Securities and Exchange Board of India (SEBI) is considering the implementation of more stringent disclosure standards for certain “high-risk” foreign portfolio investors (FPIs) who allocate more than 50 percent of their equity assets under management (AUM) to a single corporate group. In a recently released discussion paper, the market regulator contemplates compelling these FPIs to unveil the identities of natural persons hidden behind complex networks of opaque entities that direct investments into Indian stock markets and large conglomerates’ entities. FPIs classified as high-risk, with a total holding of over Rs 25,000 crore in Indian equity markets, will be required to comply with the additional disclosure requirements within six months.
SEBI estimates that approximately 6 percent of total FPI equity AUM, equivalent to around Rs 2.6 lakh crore, would be subject to the new disclosure requirements.
Newly established FPIs will be granted a six-month grace period, during which they can exceed the 50 percent group concentration threshold without the need for additional disclosures.
Earlier this month, SEBI faced criticism from a Supreme Court-appointed panel of experts investigating Hindenburg Research’s allegations against the Adani group, a US short-seller. The panel suggested that SEBI had diluted FPI regulations in 2019, enabling anonymous individuals behind the funds to conceal their identities through “opaque structures.” It remains unclear whether SEBI, responding to the panel’s scathing remarks, promptly prepared the discussion paper.
SEBI has requested public comments on the proposed measures until June 20.
