SEBI Update: The stock market regulator SEBI has increased the disclosure requirements for certain categories of foreign portfolio investors (FPIs) to ensure transparency. According to the new rule, these foreign portfolio investors will have to give details related to ownership and economic interests. SEBI has also announced changes in the rules related to eligibility of foreign portfolio investors.
SEBI issued a notification regarding amendments to the regulations stating that Foreign Portfolio Investors, who meet the eligibility criteria as decided by the Board from time to time, shall be required to furnish information regarding relationship with a person having ownership, economic interest or control or Documents have to be provided. These information and documents will have to be provided in the manner prescribed by SEBI.
In the month of May, SEBI had proposed to make it mandatory to give additional disclosures ie more information on behalf of high risk foreign portfolio investors (FPIs). SEBI had issued a consultation paper regarding this. According to which foreign investors with equity holding of more than Rs 25 thousand crore will have to give more information. SEBI had sought responses on this consultation paper by 20 June 2023.
SEBI had said that promoters or other investors of corporate groups are using the FPI route to circumvent regulatory requirements like minimum public shareholding. It becomes difficult to ascertain whether the free float of funds seen in listed companies is actual or not and the possibilities of tampering with the prices of such shares increase.
In fact, the criticism of SEBI had increased after Hindenburg’s research report regarding Adani Group’s stocks came to the fore. After which SEBI had decided to tighten the disclosure rules for FPIs.
