Sebi mandates additional disclosures for certain FPIs, releases criteria and exemption details

Economic interest means returns from the investments made by the FPI, according to the latest circular.

The market regulator has mandated the criteria for submission of disclosures by foreign portfolio investors (FPIs) under the latest amendments made to the Sebi (FPI) Regulations.

The Securities and Exchange Board of India (Sebi) had released a consultation paper on the same on May 31, after certain FPIs were observed to hold concentrated portion of their equity portfolio in a single investee company/ corporate group. Such concentrated investments raised concerns that investors or promoters of such investee companies could use such FPIs to circumvent regulatory requirements, such as that of disclosures under Substantial Acquisition of Shares and Takeovers Regulations, 2011 (SAST Regulations) or maintaining Minimum Public Shareholding (MPS) in the listed company.

According to the criteria, given in the latest circular dated August 24, granular details of all entities holding any ownership, economic interest, or exercising control in the FPI, on a full look through basis, up to the level of all natural persons, without any threshold, need to be provided by certain FPIs. These are FPIs that hold more than 50 percent of their Indian equity Assets Under Management (AUM) in a single Indian corporate group; and FPIs that individually, or along with their investor group (in terms of Regulation 22(3) of the FPI Regulations), hold more than INR 25,000 crore of equity AUM in the Indian markets.

Economic interest means returns from the investments made by the FPI; ownership interest means ownership of shares or capital of the entity or entitlement to derive profits from the activity of the entity; and control shall have the same meaning as mentioned in Regulation 2(f) of the FPI Regulations, said the circular.

Certain kinds of FPIs have been exempted from making the disclosures. They include government and government related investors registered as FPIs under Regulation 5 (a) (i) of the FPI Regulations; exchange traded funds (with less than 50 percent exposure to India and India-related equity securities) and entities listed on specified exchanges of the permissible jurisdictions as may be notified by the Board from time to time; certain kinds of pooled investment vehicles; FPIs that are unable to liquidate their excess investments due to statutory restrictions till the time such restrictions exist; newly registered FPIs, for the first 90 calendar days from the date of settlement of first trade by the FPIs in equity segment in India; and FPIs in the process of winding down their investment.

An FPI investor group that collectively hold more than Rs 25,000 crore of equity AUM in the Indian markets may also be exempted based on the criteria given above, and if equity AUM of the investor group, after deducting the AUM of such exempted FPIs, falls below Rs 25,000 crore.

The circular has also given timelines for meeting this mandate.