Clipped from: https://www.business-standard.com/article/markets/markets-regulator-sebi-tightens-timelines-for-fpi-disclosures-123031601304_1.html
Amended FPI regulations give watchdog more powers to seek vital info from overseas funds
The Securities and Exchange Board of India (Sebi) has notified stricter timelines of just seven working days for foreign portfolio investors (FPIs) to disclose vital information. This could include informing their custodians about any false or misleading information about the fund or disclosing any change in structure or common ownership, or control of the investor group.
The new changes have been brought into effect from March 14 through a notification amending the Sebi (FPIs) Regulations.
The existing regulations said FPIs had to inform the designated depository participant “forthwith”, which now has been replaced by “as soon as possible but not later than seven working days”.
“In case of any direct or indirect change in structure or common ownership or control of the foreign portfolio investor or investor group, it shall, as soon as possible but not later than seven working days, bring the same to the notice of its designated depository participant,” stated the notification.
Since no specific timelines were mentioned, it used to create confusion or arbitrage in reporting such changes, said industry experts.
“With the word ‘forthwith’, there was a lot of ambiguity in the timeline within which the FPIs were required to inform the designated depository participants about material changes.
Now, Sebi has notified the specific timelines to be followed — that is within seven working days. Furthermore, the notification, when looked with the amendments to the Prevention of Money Laundering Act (PMLA), could mean that within a timeline of seven working days, FPIs will need to update beneficial ownership information, if they exceed the 10 per cent threshold,” said Suresh Swamy, partner, Price Waterhouse & Co.
The amendments to the FPI regulations come within days of changes to the PMLA which lowered the threshold for FPIs to disclose details of ultimate beneficial owners.
The changes come at a time when Sebi and the government have faced criticism for not taking any action in the Adani matter where US-based short seller Hindenburg Research has raised questions over the authenticity of Mauritius-domiciled FPIs who hold equity stakes in the conglomerate.
Among other amendments, the markets regulator has also brought in amendments in Regulation 3 which will give Sebi the authority to seek documents in the manner it specifies from time to time.
Experts said the amendments will give Sebi increased powers to seek information from overseas funds.
“Sebi will now be able to ask for specific documents from FPIs at the time of registration in the manner it wants. Documentation requirements may become more stringent,” added Swamy.