Foreign Portfolio Investors (FPIs) rollick in Indian securities market after the Securities and Exchange Board of India (SEBI), regulator for Indian market gave a major tweaking on disclosure norms. Under the order that seeks to simplify norms and incite more investment to come in, SEBI has raised the threshold for that granular level disclosure by FPIs to ₹50,000 crore. Concomitantly, the regulator has also said it would consider all existing conflict of interest provisions under the market framework.
Earlier FPIs which invested more than ₹25,000 crore in Indian equity markets had to make detailed granular disclosures. Data on the UBOs and investment vehicle types of the investor was gathered along with this. The rise in threshold to ₹50,000 crore is an express blatant change towards SEBI’s FPI policy approach.
SEBI opines that there need to be compliance reductions for larger FPIs and at the same time continue certain transparency in the market. With the threshold increased a huge number of FPIs will be subject to less onerous disclosure, which could make it simpler for them to operate within the Indian system.
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Although SEBI has re-framed this relaxation as not a dilution of its mission towards market integrity and investor protection. The regulator said it will track FPI activities ‘carefully’ and take action if any violation costs are found. The Revised threshold for disclosure is to balance allowing foreign investment and keeping the market transparent
Apart from updating disclosure threshold, SEBI has also said it would look into the current conflict of interest provisions. The intent of this review probably to minimize conflict of interest among market participants, intermediaries and issuers across the listed company framework in a structured manner. The full scope of this review and what could change, are still to be laid by SEBI.
Indian equity markets have seen vast participation from FPIs putting them in a different league besides having a large chunk of weightage in the global financial turbulence. SEBI’s Move on Revising Disclosure Norms and Looking into Conflicts of Interest has lot of eyes on FPIs, home givers and market players.
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A possible move to raise the disclosure level might be interpreted as trying to make the Indian market more appealing to big institutional investors. Yet, it also poses a question regarding how transparent the said investment becomes when exceeding the higher threshold SEBI’s Statement to review conflict of interest provisions speaks of action in addressing a fair and efficient market environment.
Looking forward, it is likely that the effect of regulatory changes on outflows from foreign institutional investors and market sentiment would be kept under regular review..
