Recent FPI outflows not linked to SEBI's granular disclosure rules: Ananth Narayan

Requiring all foreign investors to disclose complete ownership and economic interest details on a look-through basis could have caused significant Type II errors, as such disclosures are overly burdensome for legitimate international funds using structures like omnibus accounts, said Narayan.

Any Foreign Portfolio Investors (FPI) outflows in the recent quarter cannot be attributed to the SEBI circular on granular disclosures, said Ananth Narayan, whole-time director of the Securities and Exchange Board of India (SEBI).

The circular mentioned a 'size’ criteria for granular disclosures by FPIs with AUM over Rs 25,000 crores. It was to guard against the potential circumvention of Press Note 3 stipulations by FPIs with large Indian equity portfolios, said Naryan at the Mint's BFSI Summit and Awards.

After this circular, FPIs who were not able to provide additional disclosures exited the country by September 2024, the WTM added. Plus, no FPIs have been forced to cut positions under the Rs 25,000 crore AUM rule, confirming effective implementation with minimal disruption.

Requiring all foreign investors to disclose complete ownership and economic interest details on a look-through basis could have caused significant Type II errors, as such disclosures are overly burdensome for legitimate international funds using structures like omnibus accounts, said Narayan.

In this case, in August 2023, SEBI had introduced a focused approach to mandating extensive disclosures by FPIs.

It said, FPIs investing more than 50 percent of their AUM in a single corporate group were required to make detailed disclosures. Certain entities, like Sovereign Wealth Funds, Public Retail Funds, and ETFs, were exempt from these detailed disclosures because their identity and activities are already well-regulated.

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