SEBI sets strict norms for FPIs, requires disclosure of changes in structure, ownership within 7 working days

Capital markets regulator SEBI has introduced strict norms for foreign portfolio investors (FPIs), requiring them to disclose any material change in their structure and total ownership within seven working days.

In respect of new FPI registrations, the Securities and Exchange Board of India (SEBI) may request from them any additional documents that may be required, as per notification.

Under the new rules, FPIs will inform SEBI and the Designated Depository of any false or misleading information regarding a material change and any change in their structure or control within seven working days in writing.

In addition, FPIs will have to inform, in case of penalty, pending proceedings, findings of investigations for which action may have been taken or in the process of being taken by an overseas regulator against them within seven days.

“In the event of a direct or indirect change in the structure or common ownership or control of the foreign portfolio investor or group of investors, it must as soon as possible, but not later than seven business days, notify the designated participant depository,” said SEBI.

In turn, depository participants will provide the information to the markets regulator within two days.

Under the existing regulations, FPIs are required to inform the designated participating depository “immediately”, which has now been replaced by “as soon as possible but not later than seven working days”.

Market experts felt that FPIs and trustees were taking a long time to disclose this information as there was no strict timetable in the rules.

The new rules are effective from March 14, SEBI said.

In August 2022, SEBI set up a committee headed by KV Subramanian, former Chief Economic Adviser to the Government of India, to advise it on measures to make it easier for FPIs to do business in India.

In addition, the advisory committee was entrusted with the task of suggesting measures necessary to encourage participation of FPIs in the bond market and to advise on matters relating to the investments and operations of such investors in the Indian financial markets.