SEBI Proposes Simplified Disclosure Guidelines For FPIs; Risk-Based Thresholds To Ease Compliance For Large Funds

The market regulator, Securities and Exchange Board of India (SEBI) on Tuesday (July 30) has proposed a revision to the disclosure guidelines for certain foreign portfolio investors (FPIs). The recent changes by the market regulator is aimed to simply the process and make it more practical for large investor while maintaining the regulatory oversight.

The market watchdog, in response to new challenges have suggested a more practical approach, that is, it has proposed shift to a risk based threshold for identifying and categorising FPIs as either LBC or non-LBC entities. The aim is to reduce the burden on FPIs while still achieving the regulatory objective.

About Current Challenge

The SEBI introduced an additional disclosure framework for FPIs in August 2023 which mandates that FPIs with assets under management (AUM) exceeding Rs 25,000 crore must provide detailed information about all their investors.

However, the industry feedback highlighted many challenges regarding to it, especially for large funds.

Key Elements of the Proposal

- FPIs with more than Rs 25,000 crore in equity AUM will be subject to new, simplified disclosure rules.

- FPIs will be categorised based on the country of origin or nationality of entities owning or controlling a significant portion of the AUM.

- If more than 50 per cent of the AUM is owned by entities from LBCs, the FPI will be categorised as an LBC without needing further granular disclosures.

- If more than 67 per cent of the AUM is owned by entities from non-LBCs, the FPI will be categorized as non-LBC without additional disclosures.

This proposal by Sebi is aimed to strike a balance between necessary regulatory oversight and the need to facilitate business operations.

Moreover, the market regulator has opened the proposal for public comments until August 20.