Informist, Wednesday, Feb 28, 2024
MUMBAI – The Securities and Exchange Board of India has proposed the dilution of stringent disclosure norms for select high-risk foreign portfolio investors. A consultation paper issued by the market regulator on Tuesday recommended that exemption from disclosure of granular details of beneficial ownership be granted to high-risk FPIs where the investments are in companies with no identified promoter subject to a new condition. The same exemption from disclosure was also proposed for high-risk FPIs who are university funds and university-related endowment funds.
In August last year, the market regulator issued a circular addressing the issue of possible circumvention of minimum public shareholding norms and takeover norms–and of government rule on investments by investors from India-bordering countries–by FPIs. SEBI had mandated disclosure of additional beneficial ownership data of FPIs who hold more than 50% of their Indian equity assets in a single Indian corporate group. SEBI also mandated the additional disclosure for FPIs which individually, or along with their investor group, hold more than 250 bln rupees of equity assets in the Indian market.
SEBI argued in the consultation paper that the risk from FPIs aiding companies in circumventing the minimum public shareholding requirement of 25% does not exist if the company does not have an indentifiable promoter or promoters. Therefore, in its consultation paper it proposed exempting additional disclosure requirements in such cases.
However, the market regulator admitted in the paper that the risk of circumvention of takeover norms still remain. To address this, it has proposed to subject the exemption to a new requirement that the composite holdings of all FPIs in the apex company in the single corporate group be less than 3% of that company’s total equity capital.
In the case of exemption for university funds and university-related endowment funds, the market regulator argued that these funds receive “contributions from various donors and the returns from such investments accrue to the university rather than to the donors.” SEBI further said in the paper that these funds “generally enjoy tax-exempt status in their home jurisdictions and are therefore subject to disclosure requirements to ensure that the corpus of the fund is used for the purposes for which the fund was set up.” End
Reported by Rajesh Gajra
Edited by Namrata Rao
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