The Securities and Exchange Board of India (SEBI) has recently announced a significant update regarding foreign portfolio investors (FPIs). At a board meeting chaired by the newly appointed Tuhin Kanta Pandey, the regulatory body approved a proposal to double the investment threshold for detailed disclosures from Rs 25,000 crore to Rs 50,000 crore. This decision reflects the evolving landscape of the Indian capital markets and aims to enhance transparency.

New Disclosure Threshold for FPIs

Under the new regulations, FPIs managing equity assets exceeding Rs 50,000 crore will now be mandated to provide comprehensive details about their investors or stakeholders. This move comes in response to the remarkable growth in cash equity market trading volumes, which have more than doubled from FY 2022-23 to FY 2024-25. According to SEBI, this adjustment is crucial to adapt to the changing dynamics of market activity.

• Key Changes:
  • Investment threshold increased from Rs 25,000 crore to Rs 50,000 crore.
  • FPIs with over 50% of their equity AUM in a single corporate group must comply with additional disclosure requirements.
  • Full disclosure is required for all entities holding any ownership or economic interest.

Enhancing Market Integrity

The regulatory framework aims to prevent any potential circumvention of established norms concerning minimum public shareholding (MPS) and substantial acquisitions of shares and takeovers (SAST). A circular issued by SEBI on August 24, 2023, elaborated on the necessity of these disclosures to maintain the integrity of Indian securities markets.

• Ongoing Compliance:
  • FPIs are still required to meet existing conditions to avoid circumvention of MPS and SAST norms.
  • Compliance with the Prevention of Money Laundering Act (PMLA) remains mandatory for all FPIs.

Protecting Market Functionality

SEBI’s decision to raise the disclosure threshold is not merely a bureaucratic adjustment; it’s a strategic move designed to uphold the orderly functioning of the Indian capital markets. By mandating greater transparency from FPIs with substantial equity portfolios, the regulator aims to mitigate risks and enhance investor confidence.

In conclusion, the revised investment threshold is a proactive step towards ensuring that foreign portfolio investors contribute positively to the Indian market’s ecosystem. As the trading landscape evolves, these measures will help maintain transparency and uphold the integrity of the financial system.

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