Actually, now small-medium FPIs will not need much disclosure, which will make their functioning easier. Apart from this, transparency in the market will increase.
Indian capital market regulator SEBI has decided to increase the disclosure threshold for foreign portfolio investors (FPIs). Now only FPIs with equity assets under management (AUM) of more than Rs 50,000 crore will have to provide additional information, whereas earlier this limit was Rs 25,000 crore. This decision was taken in the board meeting led by SEBI’s new chairman Tuhin Kant Pandey.
What has changed now?
Old rule: FPIs with equity AUM of more than Rs 25,000 crore had to provide detailed information of all their investors/stakeholders.
New rule: Now only FPIs with AUM of more than Rs 50,000 crore will have to make this disclosure.
SEBI said, “The trading volume of the cash equity market has now doubled as compared to FY 2022-23. Therefore, it has been decided to increase the threshold.”
Why was this rule introduced?
In a circular dated August 24, 2023, SEBI had given 2 conditions to FPIs – If more than 50 percent of the equity AUM of an FPI is in a single corporate group, then it will have to make additional disclosures. Apart from this, FPIs with AUM of more than Rs 25,000 crore will have to provide information about their ultimate investors (up to natural persons).
Actually, its purpose was to ensure compliance with Minimum Public Shareholding (MPS) and Takeover rules, so that there is no disturbance in the market. Now SEBI has clarified that investigations related to MPS and Takeover rules will continue as before. Also, all FPIs will have to comply with PMLA (Prevention of Money Laundering Act).
What difference will it make?
This will provide relief to large foreign investors FPIs. Actually, now small-medium FPIs will not need much disclosure, which will make their functioning easier. Apart from this, transparency in the market will increase, that is, SEBI aims to ensure investors’ privacy and compliance with rules while keeping the market stable.