{"id":246126,"date":"2023-06-02T21:46:34","date_gmt":"2023-06-02T16:16:34","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=246126"},"modified":"2023-06-02T21:46:34","modified_gmt":"2023-06-02T16:16:34","slug":"concentration-concerns-sebis-proposal-will-make-fpis-more-transparent","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/concentration-concerns-sebis-proposal-will-make-fpis-more-transparent\/","title":{"rendered":"Concentration concerns \u2013 Sebi’s proposal will make FPIs more transparent"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the article\u00a0\u201cConcentration concerns \u2013 Sebi’s proposal will make FPIs more transparent<\/strong>\u201d published in Business Standard <\/strong>on\u00a02nd<\/sup> June 2023<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 Indian Economy \u2013 Capital Markets<\/strong><\/p>\n

Relevance: <\/strong>About new additional disclosure requirements for FPIs.<\/strong><\/p>\n

News<\/strong>: The Securities and Exchange Board of India (Sebi<\/strong>) has published a consultation paper that proposes new additional disclosure requirements for foreign portfolio investors (FPIs<\/strong>).<\/p>\n

What is the current requirement for additional disclosures for FPIs?<\/strong><\/h2>\n

Currently, Sebi proposes that high-risk FPIs holding more than 50 percent of assets under management (AUM) in a single corporate group would be required to comply with requirements for<\/strong> additional disclosures, if such concentration exceeds a temporary window of 10 days.<\/p>\n

Such FPIs would have to provide the granular data<\/strong> of all entities with any ownership, economic interest, or control rights.<\/p>\n

However, this requirement is qualified by exempting newly registered FPIs for the first six months and FPIs that are currently undergoing the winding-up process.<\/p>\n

What are the new additional disclosure requirements for FPIs proposed by Sebi?<\/strong><\/h2>\n

The new additional disclosure requirements primarily focus on identifying the true beneficial owners of shares<\/strong> held by concentrated FPIs.<\/p>\n

The aim is to prevent potential evasion<\/strong> of minimum public shareholding (MPS<\/strong>) regulations and misuse of the FPI route to bypass Press Note 3 (PN3<\/strong>) guidelines.<\/p>\n

The paper is likely a response to the Hindenburg Research incident, where a US-based short seller accused the Adani Group of using FPIs as proxies to hold shares in listed companies, exceeding the maximum promoter shareholding limit of 75%.<\/p>\n

What is PN3 guidelines and why has Sebi come up with new additional disclosure requirements?<\/strong><\/h2>\n

The PN3 mandates that<\/strong> entities of nations sharing land borders with India, or where the beneficial owner of an investment in India is situated, or is a citizen of any such country, can invest only via the government route.<\/p>\n

Sebi is concerned that entities of these nations may use FPIs as a means to hide their ownership of Indian shares.<\/strong><\/p>\n

The consultation paper also highlights that some FPIs concentrate a significant portion of their equity portfolio in a single company or a group of companies.<\/p>\n

Such concentrated investments raise suspicions that promoters or other investors acting together may exploit the FPI route to evade regulations<\/strong>. This could increase the risk of price manipulation.<\/p>\n

What can be done to prevent evasion?<\/strong><\/h2>\n

In order to investigate if concentrated holdings exist, it will be necessary to compile a list of FPIs with such patterns<\/strong> along with obtaining detailed information about<\/strong> the ownership, economic interest, and control of these FPIs.<\/p>\n

Existing legislation, such as<\/strong> the Prevention of Money Laundering Act, 2002, and the Prevention of Money Laundering (Maintenance of Records Rules), 2005, provides a framework for identifying beneficial owners.<\/p>\n

However, in practice, it is challenging to apply these regulations due to the complex ownership structures often employed by such entities.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cConcentration concerns \u2013 Sebi’s proposal will make FPIs more transparent\u201d published in Business Standard on\u00a02nd June 2023. Syllabus: GS 3 \u2013 Indian Economy \u2013 Capital Markets Relevance: About new additional disclosure requirements for FPIs. News: The Securities and Exchange Board of India (Sebi) has published a consultation paper… Continue reading Concentration concerns \u2013 Sebi’s proposal will make FPIs more transparent<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-246126","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/246126","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=246126"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/246126\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=246126"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=246126"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=246126"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}