India’s market regulator, the Securities and Exchange Board of India (SEBI) has implemented stricter disclosure requirements for offshore funds deemed “high-risk” that invest in local markets. This decision targets funds that may be trying to evade regulations on public shareholding.
Why the new disclosure norms? Per Reuters, this move aims to expose complex structures that certain offshore funds employ when investing in Indian-listed companies. This action follows an investigation into the Adani Group for suspected violations, but the probe hasn’t made much headway due to strict foreign privacy laws.
SEBI Chairperson Madhabi Puri Buch clarified that they have been planning these new rules for foreign investors for over a year. Their aim is to establish clear regulations, regardless of where the funds originate.
Offshore funds that have more than half of their assets invested in a single group of companies, and have invested over ₹25,000 crore in Indian equity markets, will now need to disclose their investors, according to SEBI.
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Severe consequences: Ananth Narayan G., a SEBI board member warns that if these funds fail to provide investor details, they will lose their Indian market registration. They also must forfeit any privacy rights granted by specific jurisdictions.
Yogesh Chande, a partner at Shardul Amarchand Mangaldas, suggests that this move will promote a diverse shareholder base for public companies and reduce the ability of promoters to exert undue influence over listed companies via these shareholders.
The regulator will, however, spare government-owned funds and other specific investors from the additional disclosures. These include sovereign wealth funds, pension funds, public retail funds, certain listed exchange-traded funds, corporate entities, and verified pooled investment vehicles that meet certain conditions.
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