Sebi's tough norms for FPIs: Mandatory to disclose any material changes

Capital markets regulator Sebi has made stringent norms for Foreign Portfolio Investors (FPIs), asking them to disclose any material change in their structure and common ownership within seven working days.

With regard to new FPI registrations, the Securities and Exchange Board of India (Sebi) can ask them for any additional documents which may be required, according to a notification.

Under the new rules, FPIs will inform Sebi and designated depository about any false or misleading information about change in material respect and any change in their structure or control within seven working days in writing.

In addition, FPIs will have to inform in case of any penalty, pending proceedings, findings of investigations for which action may have been taken or is in the process of being taken by an overseas regulator against them within seven days.

"In case of any direct or indirect change in structure or common ownership or control of the foreign portfolio investor or investor group, it shall, as soon as possible but not later than seven working days, bring the same to the notice of its designated depository participant," Sebi said.

In turn, depository participants will submit the information to the markets regulator within two days.

As per the existing regulations, FPIs were required to inform the designated depository participant "forthwith", which now has been replaced by "as soon as possible but not later than seven working days".

Market experts believe that FPIs and custodians used to take a lot of time in disclosing these information as there was no strict timeline prescribed in the rules.

The new rules have become effective from March 14, Sebi said.

In August 2022, Sebi had constituted a committee headed by K V Subramanian, former chief economic adviser to Government of India, to advise it on measures to facilitate ease of doing business by FPIs in India.

In addition, the advisory committee was entrusted with the task of suggesting measures required to encourage FPI participation in the bond market and advise on issues related to investments and operations of such investors in Indian financial markets.