Sebi proposes further exemptions of granular disclosures for select FPIs

It is proposed that disclosure exemption will be given only if the composite holding of all such FPIs in the group is less than three per cent of the total equity share capital

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The Securities and Exchange Board of India (Sebi) has proposed further exemptions of granular disclosures for select foreign portfolio investors (FPIs) and, in the case of stocks with no identified promoter.

Under the recently introduced additional disclosure requirement, FPIs with more than 50 per cent of their assets in a single corporate group have to furnish granular details of their ultimate beneficiaries and economic interest.

The stricter disclosure norms aim to ensure companies are not circumventing the minimum public shareholding regulations using the FPI route. However, the regulator feels such concerns don’t arise in companies without any promoter.

It is proposed that disclosure exemption will be given only if the composite holding of all such FPIs in the group is less than 3 per cent of the total equity share capital.

“Custodians and depositories will track the utilisation of this 3 per cent limit for companies without an identified promoter at the end of each day. When the 3 per cent limit is met or breached, depositories and custodians will make this information public before the start of trading the next day,” Sebi has said in a discussion paper.

This threshold of 3 per cent is to keep in check any risk of violation of the takeover regulations under which additional disclosures are mandated in the case of a significant change in the holdings.

Additionally, Sebi has also proposed exemption of university funds and related endowments which fall under the Category-I FPI, subject to certain conditions.

For instance, the university must be amongst the top 200 based on QS Quacquarelli Symonds rankings and have India equity exposure less than 25 per cent of the global assets under management (which has to be above Rs 10,000 crore).

Sebi has sought suggestions on the latest proposals by March 8.

University of London, University of Cambridge, Cornell University, University of California are some of the universities with Category-I FPIs registered in India, according to data on National Securities Depository.

In addition to the 50 per cent single group exposure, those FPIs with assets under custody (AUC) of over Rs 25,000 crore in domestic equities too have to provide additional disclosures.

According to an initial estimate by Sebi, the assets held by such FPIs with holdings above the thresholds were to the tune of Rs 2.6 trillion. However, to ensure genuine FPIs and those with broad-based holdings are not burdened with additional disclosures, Sebi had later provided exemptions to several categories of FPIs. As a result, the net impact on FPI AUC was expected to be significantly less.

FPIs such as sovereign wealth funds, certain public retail funds and pooled investment vehicles registered with regulators of certain jurisdictions are exempted from the additional disclosure norms.

Exchange-traded funds traded on the bourses of eight jurisdictions are also exempted but they must have less than 50 per cent exposure in India-listed equities. These jurisdictions are the US, Japan, South Korea, France, the UK (excluding British overseas territories), Germany, Canada, and the International Financial Services Centres in India.

Sebi board in June 2023 approved changes in the FPI regulation seeking granular details following the allegations by Hindenburg Research against Adani Group.

These new rules have come into effect from February 1. Impacted FPIs have time up to August to rebalance their holdings or submit additional details.