Sebi may ease FPI disclosure norms, double granular disclosure threshold

The Securities and Exchange Board of India (Sebi) is likely to raise the investment threshold for granular ownership disclosures by foreign portfolio investors (FPIs) from ₹25,000 crore to ₹50,000 crore, according to people in the know. The move is aimed at boosting FPI sentiment and aligning the limit — set in 2023 — with market growth. 

The decision is likely to be made at Sebi’s upcoming board meeting on March 24, where the securities watchdog may ease advance fee collection rules for research analysts and investment advisors and provide certain relaxations to the alternative investment fund (AIF) ecosystem. 

 

This will be the first board meeting after Tuhin Kanta Pandey, who assumed the role of Sebi chairperson earlier this month.

The disclosure norms, introduced in August 2023, require FPIs with assets under custody (AUC) of over ₹25,000 crore or with over 50 per cent of their AUC concentrated in a single corporate group to provide additional ownership details. 

Doubling the threshold will help reduce compliance burdens while maintaining transparency. The change comes at a time when FPIs have withdrawn over ₹2 trillion from domestic equities over the past six months.

 

Vivaik Sharma, partner at Cyril Amarchand Mangaldas, said increasing the equity exposure limit while retaining the concentration limit for a single group was a pragmatic move. “FPIs with such significant investments are expected to have inherent safeguards against the circumvention of PN3 (Press Note 3) norms,” Sharma said. 

PN3 is a central government rule introduced in April 2020 to regulate foreign direct investments (FDIs) from countries sharing a land border with India. The rule mandates that any investment from these countries, including China, can only be made with prior government approval. 

Sebi did not respond to emailed queries at the time of publishing.

 

Other relaxations on cards

 

Another critical agenda item is the review of advance fee collection limits for research analysts and investment advisors. Currently, these professionals can collect fees for one quarter in advance. Sebi may extend this limit to one year, addressing industry demands for greater flexibility. 

The regulator is also expected to relax regulations for Category II AIFs’ debt investments and revise the framework for angel funds. 

Sebi may also expand the definition of qualified institutional buyers (QIBs) to include accredited investors for investments in angel funds. 

Nandini Pathak, partner at Bombay Law Chambers, said the accreditation process should be streamlined in terms of cost, timelines, and technology. “Fund managers should be allowed to intermediate in the process, and professional criteria should be included as an independent basis for accreditation, separate from financial criteria.” 

The markets regulator may also approve measures to make sachet-sized Systematic Investment Plans (SIPs) more cost-effective for fund houses. While several asset management companies, such as SBI Mutual Fund and Kotak Mahindra Asset Management, have already launched SIPs as low as ₹250, Sebi's proposed measures aim to reduce operational costs for such small-ticket investments. This could include lowering intermediary charges and providing incentives to distributors.

 

Proposals likely to be deferred

 

While Sebi has a packed agenda, sources indicate the review of ownership of clearing corporations and reforms related to secretarial compliance and auditor appointments may not be taken up in this meeting. Industry bodies have submitted suggestions, including objections, on the secretarial compliance proposals, which require further deliberation before being presented to the board, according to people in the know. 

The regulator may also hold a press briefing, marking a departure from the recent trend of skipping such interactions after board meetings.