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SEBI Rules: The Securities and Exchange Board of India (Securities and Exchange Board of India) ie SEBI has proposed to make it mandatory to provide additional disclosures ie more information on behalf of high risk foreign portfolio investors (FPIs). SEBI has issued a consultation paper regarding this. Under this, foreign investors with equity holding of more than Rs 25,000 crore will have to give more information. SEBI has sought responses on this consultation paper by June 20, 2023, and based on these, some more changes in the rules are possible.
sebi brought consultation paper to avoid any loophole in minimum public shareholding
In its consultation paper, SEBI has proposed to obtain detailed information from high-risk FPIs whose investments are concentrated in single companies or business groups. This will avoid any negligence regarding the requirement of Minimum Public Shareholding (MPS). It has come to the notice of the stock market regulator SEBI that some FPIs have concentrated a substantial part of their equity portfolio in one company. In some cases, this share has been established and maintained over a long period of time.
Steps taken to avoid misuse of FPI route
Therefore, Sebi said, “Such concentrated investment raises concerns and the possibility that promoters or other investors of such corporate groups are using the FPI route to circumvent regulatory requirements such as minimum public shareholding.” The problem is that it becomes difficult to ascertain whether the free float of funds seen in listed companies is actual or not and the fear of stock manipulation increases in such stocks.
What is special in SEBI’s consultation paper
A provision has been kept in the consultation paper that if FPIs hold more than 50 per cent holding in a listed group within 6 months, they will have to make additional disclosures for the same.
They have been placed in the high risk category
Under the proposal, such foreign portfolio investors would be required to make additional disclosures about the ownership, economic interest and control of such funds. Along with this, market regulator SEBI has suggested classification of FPIs on the basis of risk. Under this, the government and related entities such as the central bank and sovereign wealth funds have been placed in the low risk category, while pension funds and public retail funds have been classified as medium risk. Apart from these, all other FPIs have been kept in high risk category.
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