Capital markets regulator SEBI has proposed requiring high-risk Foreign Portfolio Investors (FPIs) to provide enhanced disclosures.
It is a precautionary measure against potential manipulation of the Minimum Public Shareholding (MPS) requirement.
The move comes after SEBI observed that certain FPIs had invested a significant portion of their equity portfolio in a single company for extended periods.
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That has raised concerns about possible circumvention of regulatory obligations, such as maintaining Minimum Public Shareholding.
In a consultation paper, SEBI suggests obtaining detailed information from high-risk FPIs with concentrated equity holdings in individual companies or business groups.Â
These FPIs would be required to make additional disclosures regarding ownership, economic interests, and control of the funds.
Additionally, the regulator proposes classifying FPIs based on risk levels, with government entities and related organizations considered low risk, while pension funds and public retail funds fall under the moderate risk category.
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All other FPIs are categorized as high-risk.
The proposal states that high-risk FPIs, holding over 50 percent of their equity Assets Under Management (AUM) in a single corporate group would be obliged to comply with the additional disclosure requirements.
However, SEBI also suggests certain threshold relaxations for global entities with higher AUMs and newly-established FPIs during the initial six months.
Existing high-risk FPIs that exceed the 50 percent concentration threshold in a single corporate group will be given a six-month period to reduce their exposure.
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Furthermore, it is recommended that high-risk FPIs with an overall holding in the Indian equity markets exceeding ₹25,000 crore should also comply with additional granular disclosure requirements within six months.
These proposals aim to prevent potential misuse of the FPI route and any potential circumvention of Minimum Public Shareholding regulations.
SEBI emphasizes that the suggested additional disclosure requirements will not impact low-risk and moderate-risk FPIs in any way.
SEBI has invited public comments on these proposals until June 20.
