In a bid to bring greater transparency in Indian capital markets, Sebi on Thursday mandated additional disclosures from certain FPIs whose stake is concentrated in a single company or group firm.

Such foreign portfolio investors (FPIs) will be required to identify all entities having any ownership, economic interest and control rights.

The financial markets regulator has also specified timelines for making such disclosures.

The Securities and Exchange Board of India (SEBI) said in a circular that the new framework will come into effect from November 1.

Market experts believe that the origin of the move is from the Adani issue, where Sebi could not identify the beneficial owners of some foreign portfolio investments in Adani shares as the current rules are lax in identifying the real owners of many investments.

SEBI said, “A detailed description of all entities having any ownership, economic interest, or control in the FPI shall be provided by the FPI on a full look-through basis, without limitation, to the level of all natural persons, which We do.” Certain Norms for Designated Depository Participants”.

FPIs holding more than 50 per cent of their equity Assets Under Management (AUM) in a single corporate group will have to comply with additional disclosure requirements.

In addition, FPIs with aggregate exposure to more than Rs 25,000 crore in the Indian equity markets will be required to comply with additional detailed disclosure requirements.

However, broad-based, aggregated structured FPIs with a broad investor base, government or government-related investors with ownership interest may not pose significant systemic risk.

Accordingly, the government and related entities such as central banks, sovereign wealth funds and public retail funds registered as FPIs are exempted from making such detailed disclosures.

With regard to additional disclosures, the regulator said that FPIs holding more than 50 per cent of their Indian equity AUM in a single Indian corporate group will have 10 trading days within which they can reduce their exposure.

Thereafter, such FPIs will be required to make additional disclosures. Further, such FPIs shall not make fresh equity purchases of any company belonging to the corporate group during the next 30 calendar days from the date of exceeding the limit.

Similarly, FPIs having equity AUM of more than Rs 25,000 crore in Indian markets will have 90 calendar days to reduce their holdings, after which they will have to make additional disclosures.

The accounts of all such FPIs will be blocked for further equity purchases till the holding falls below Rs 25,000 crore.

As per the circular, FPIs whose investments exceed the prescribed limit even after the expiry of these timelines will be given 30 trading days to make disclosures, after which their registration will become invalid.

As per the circular, the FPI shall liquidate its securities and exit the Indian securities market by surrendering its registration within 180 calendar days from the date of invalidation of the certificate.

During these 180 days, the investee companies shall limit the voting rights of the FPI to its shareholding corresponding to its actual shareholding or 50 per cent of its equity AUM, whichever is less, on the date its FPI registration becomes invalid.

In order to monitor compliance with the exposure limit in a single corporate group, a repository containing the names of companies forming part of each Indian corporate group will be publicly disseminated on the websites of stock exchanges and depositories.

The regulator came out with a consultation paper in this regard in May and the Sebi board approved the proposal in June.

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