The decision by India’s capital markets watchdog to exempt foreign portfolio investors (FPI) from additional disclosure requirements will ease their compliance burden where majority assets held by them are based in the country.

The Securities and Exchange Board of India (Sebi) has exempted overseas funds, having more than 50% of their India equity assets under management in a single corporate group, in case the concentrated holdings of the funds are in a listed company with no identified promoter.

“It will ease out compliance burdens in situations where majority assets held by FPI are based in India,” said Tejveer Singh, senior advisor, PSL Advocates and Solicitors

Sebi said FPIs would qualify for the exemption if they met two conditions.

First, these FPI holds not more than 50% of India equity assets under management in the corporate group, after excluding its holding in the parent company with no identified promoter. Second, the composite holdings of all such FPIs, which hold more than the 50% concentration criteria and are not exempted, are less than 3% of their total equity share capital.

Some securities lawyers said the relaxation could have been wider.

“Ideally, the exemption should have been extended to several other categories of FPIs. For instance, FPIs owned by private equity (PE) funds, especially those managed by large listed PE firms, should have been part of this,” said Pulkit Sukhramani, partner in securities laws litigation team at JSA. “FPIs holding shares in companies without promoters should be exempted regardless of the 3% threshold or corporate group requirements.”

“The framework on granular disclosures could have been thought through better. A number of FPIs are known to have approached Sebi for specific exemptions. The relaxation proposed is unlikely to address practical challenges which several FPIs are facing,” Sukhramani said.

Sebi has also relaxed the timelines for disclosure of material changes by FPIs.

“FPIs were required to disclose material changes within 7 days which will now be 30 days in many cases and for others wherein it’s still 7 days in such cases also additional documents could be provided in 30 days which will give them sufficient time as earlier 7 days was too narrow a window,” Singh of PSL Advocates and Solicitors said.

  • Published On Mar 18, 2024 at 08:50 AM IST

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