Sebi Doubles Disclosure Threshold for FPIs
MUMBAI: The Securities and Exchange Board of India (Sebi) has announced a significant regulatory change, doubling the asset threshold for foreign portfolio investors (FPIs) from Rs 25,000 crore to Rs 50,000 crore. This new requirement mandates that FPIs with substantial equity assets under management (AUM) disclose detailed information about the entities and individuals holding interests in their funds. The decision comes in response to a notable increase in trading volumes in the Indian cash market, which have more than doubled between FY23 and FY25.
New Disclosure Requirements for FPIs
Under the revised regulations, FPIs managing over Rs 50,000 crore in equity AUM must provide comprehensive disclosures regarding all entities, including natural persons, that hold any ownership or economic interest in their funds. This measure aims to enhance transparency and prevent large FPIs from potentially disrupting market stability through their trading activities. The Sebi release emphasized the importance of these disclosures in maintaining orderly market functioning.
In addition to the new disclosure requirements, all FPIs are still obligated to comply with existing regulations, including Know Your Customer (KYC) norms and the Prevention of Money Laundering Act. These measures are designed to ensure that the integrity of the financial system is upheld and that investors are protected from fraudulent activities.
Changes to Market Infrastructure Regulations
Sebi’s board meeting also introduced changes concerning public interest directors and key managerial personnel within market infrastructure institutions. Notably, the regulator has eliminated the cooling-off period previously imposed on officials transitioning to competing entities. This change is expected to facilitate smoother transitions and enhance the competitiveness of market infrastructure institutions.
Furthermore, the board approved a proposal requiring governing boards of market infrastructure institutions to document and communicate their rationale if they choose not to reappoint an existing public interest director after their first term. This move aims to increase accountability and transparency in the governance of these institutions.
New Fee Structures for Investment Advisers
In a related development, Sebi has revised the fee structures for investment advisers and research advisers. These professionals can now charge fees in advance for up to one year, an increase from the previous limits of two quarters and one quarter, respectively. This change allows for greater flexibility in fee arrangements, provided that the terms are mutually agreed upon between the adviser and the client. During the press conference following the board meeting, Sebi Chairman Tuhin Kanta Pandey reiterated the regulator’s commitment to ensuring that public sector undertakings (PSUs) adhere to minimum public shareholding norms. He acknowledged the challenges in pressuring some PSUs to reduce government stakeholdings to meet these requirements, particularly when promoters’ shareholdings exceed the 75% threshold.
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