SEBI Proposes Additional Disclosures For High-Risk FPIs

Foreign portfolio investors who have a substantial portion of their investments concentrated in a single Indian company or group will have to make additional disclosures, according to a SEBI consultation paper floated on Wednesday.

Currently, FPIs are mandated to disclose information about the beneficial owners only when the ownership exceeds the limit specified under the anti-money laundering law. The thresholds are 10% for companies and trusts and 15% for partnerships. The information is not often disclosed, as the FPIs rarely cross this threshold.

According to the regulator, this often leads to promoters of such groups or investors acting in concert using the FPI route to circumvent several regulatory requirements, such as that of maintaining the minimum public shareholding, increasing the risk of price manipulation in such scrips.

The regulator also raised apprehension that the route was being used to circumvent Press Note 3.

According to Press Note 3, entities from countries that share borders with India can only invest in India through the government approval route. Investors from such countries could be investing in India through FPIs based out of non-land-bordering countries, the regulator has noted.

In order to prevent this, it is necessary to identify the investors in such FPIs at a granular level, the regulator has said.

SEBI has asked for comments on its proposals by June 20.