Adani-Hindenburg case: SEBI tightens disclosures norms for FPIs to bring transparency

The Securities Exchange Board of India (SEBI), has mandated additional disclosures from certain FPIs that have concentrated holding in a single Indian company or a group firm. This comes, as SEBI is looking to bring greater transparency to the Indian equity market.

The markets regulator in its notification introduced additional norms related to disclosure of beneficial owners for FPIs holding more than 50% of their Indian equity assets under management in a single Indian corporate group or those that individually, or along with their investor group, hold more than ₹25,000 crore worth of Indian stocks.

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However, FPIs having a broad-based, pooled structure with a widespread investor base, ownership interest by the government, or government-related investors may not pose significant systemic risk.

“Granular details of all entities holding any ownership, economic interest, or exercising control in the FPI, on a full look through basis, up to the level of all natural persons, without any threshold, shall be provided by FPIs,” stated the Sebi circular.

This comes after reports regarding SEBI's difficulty in identifying beneficial owners of some foreign portfolio investments in Adani stocks emerged.

With regard to additional disclosures, the regulator said FPIs holding more than 50 per cent of their Indian equity AUM in a single Indian corporate group will have 10 trading days within which they can bring down their exposure.

Post this, such FPIs will have to make additional disclosures. The SEBI has also mandated that once the disclosures are made, the FPIs should not make fresh equity purchases of any company belonging to the corporate group during the next 30 calendar days from the date of exceeding the threshold.

Similarly, the FPIs holding more than Rs 25,000 crore of equity AUM in the Indian markets will have 90 calendar days to bring down their holding, after which they will have to make the additional disclosures.

Accounts of all such FPIs will be blocked for further equity purchases until the holding is brought below Rs 25,000 crore.