Sebi floats consultation paper on additional disclosures by FPIs

Moreover, existing high-risk FPIs, which have more than 50% concentration threshold in a single corporate group, will also be required to provide additional disclosure under the new rules.

All funds except for those owned by the government, sovereign wealth funds, pension funds and public retail funds would be considered high-risk offshore funds, it added.

Additional disclosures will have to be made within three months of the event, failing which the FPI will be required to bring down the AUM below the threshold of Rs 25,000 crore.

Meanwhile, new FPIs that have just begun investments will be allowed to cross the 50% group concentration threshold for up to a period of six months without the need for additional disclosures becoming effective. Beyond six months, any breach above the 50% concentration threshold by such FPIs will trigger the requirement for additional disclosures.

The objective behind this consultation paper is to safeguard investors against possible circumvention of Minimum Public Shareholding (MPS) and to guard against possible misuse of the FPI route.

The last date to send comments is June 20.According to Sebi’s estimates, the FPI AUM of around Rs 2.6 lakh crore may potentially be identified as high-risk FPIs. This FPI AUM, which is around 6% of total FPI equity AUM and less than 1% of India’s total equity market capitalisation, meets either of the 50% group concentration or the Rs 25,000-crore fund size thresholds, the consultation paper said.

Under the rules, there will be a mandatory requirement of making granular disclosures around ownership of, economic interest in, and control of “objectively identified high-risk FPIs” that have either concentrated single group exposures and/ or significant overall holdings in their India equity investment portfolio, the consultation paper said.

The consultation paper said that only a limited number of “objectively identified” high-risk FPIs with either concentrated single-group equity exposures or significant equity holdings will be mandated to provide additional granular disclosures.

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