The Securities and Exchange Board of India (Sebi) has mandated that foreign portfolio investors (FPIs) disclose critical information within seven working days. This might include alerting their custodians to any inaccurate or misleading information about the fund or revealing any change in the investor group’s structure, common ownership, or governance.
The new modifications went into effect on March 14 as a result of a notice revising the Sebi (FPI) Rules.
FPIs were required to notify the authorized depository participant “as quickly as practicable but no later than seven working days,” according to the current rules.
“In the event of any direct or indirect change in the structure, common ownership, or control of the foreign portfolio investor or investor group, it shall bring the same to the notice of its designated depository participant as soon as possible but not later than seven working days,” stated the notification.
According to industry experts, since no particular dates were specified, it used to cause uncertainty or arbitrage in reporting such changes.
“With the phrase ‘forthwith,’ there was a lot of uncertainty in the period within which the FPIs were expected to notify the authorized depository participants about major changes.
Sebi has now informed us of the particular deadlines to be followed, which are within seven working days. Furthermore, when combined with the amendments to the Prevention of Money Laundering Act (PMLA), the notification could mean that FPIs will need to update beneficial ownership information within seven working days if they exceed the 10% threshold,” said Suresh Swamy, partner at Price Waterhouse & Co.
The modifications to the FPI rules came only days after changes to the PMLA lowered the bar for FPIs to disclose information about ultimate beneficial owners.
The revisions come at a time when Sebi and the government have been chastised for failing to intervene in the Adani case, in which US-based short seller Hindenburg Research has raised concerns about the legitimacy of Mauritius-domiciled FPIs with equity positions in the company.
Among other things, the markets regulator has amended Regulation 3 to give Sebi the ability to collect papers in the way it defines from time to time.
According to experts, the reforms would give Sebi more authority to request information from international funds.
“Sebi will now be allowed to ask for certain papers from FPIs at the time of registration in the way it desires.” Documentation requirements might grow more onerous,” Swamy remarked.