Notes

Deadline for beneficial Ownership of FPI holdings end on September 9

Contact Counsellor

Last Updated10/09/2024

Even as the deadline to disclose the beneficial owners of holdings in foreign portfolio investors (FPIs) to the Securities and Exchange Board of India (SEBI) ends on September 9, some of these foreign investors have sought legal recourse to keep away from adhering to the regulations.

As the September 9 deadline approaches for foreign portfolio investors (FPIs) to disclose their beneficial owners to the Securities and Exchange Board of India (SEBI), some investors are challenging these stringent regulations.
Two Mauritius-based FPIs, LTS Investment Funds and Lotus Global Investment, have sought legal recourse from the Securities Appellate Tribunal, asking for an extension until March 2025 to comply with the new norms.
These FPIs, associated with the January 2023 Hindenburg Research report on the Adani Group, claim that SEBI's requirements are discriminatory.

In August 2022, SEBI introduced new rules requiring FPIs to disclose detailed information on beneficial owners if they hold:
- More than 50% of their equity assets under management (AUM) in a single corporate group, or
- Over ₹25,000 crore in the Indian equity markets.
The goal of this mandate is to prevent round-tripping, where promoters use the FPI route to bypass regulations like the Substantial Acquisition of Shares and Takeovers Regulations, 2011 (SAST) and Minimum Public Shareholding (MPS).
SEBI noted concerns about concentrated investments, which could indicate FPIs acting in concert with corporate promoters to skirt disclosure rules.

The legal action by LTS Investment Funds and Lotus Global Investment highlights resistance from some FPIs, who claim the regulations unfairly target their investors. Meanwhile, the deadline has caused unease in the markets.
FPIs withdrew ₹20,339 crore from Indian markets in August, attributing the sell-off to regulatory pressure.
This mass exodus underscores the potential consequences of non-compliance, as failure to meet the requirements would result in FPIs being disqualified from investing in India, forcing liquidation of their holdings.

SEBI’s regulations target high-risk FPIs, estimated to hold around ₹2.6 lakh crore in assets under management, based on March 2023 data. However, sources suggest that the number of FPIs required to provide enhanced disclosures may be significantly lower than originally anticipated.
This regulatory push signals India’s efforts to tighten oversight on foreign investments and increase transparency in its markets, aligning with global standards.
However, the tension between regulatory enforcement and market participation highlights the delicate balance required to maintain investor confidence while ensuring compliance.