Executive Summary:
This circular amends a previous SEBI circular regarding additional disclosures by Foreign Portfolio Investors (FPIs). It provides an exemption from these disclosures for FPIs with over 50% of their Indian equity AUM in a corporate group, subject to specific conditions, including the absence of an identified promoter for the group's apex company. The circular clarifies the consequences for FPIs that met the criteria for additional disclosures as of October 31, 2023, and introduces a 3% limit on composite holdings in apex companies without identified promoters. The provisions of this circular are effective immediately.
Key Points / Main Content:
Exemption from Additional Disclosures:
* FPIs with more than 50% of their Indian equity AUM in a corporate group are exempt from additional disclosures if:
* The corporate group's apex company has no identified promoter.
* The FPI holds no more than 50% of its Indian equity AUM in the corporate group, excluding holdings in the apex company.
* The composite holdings of all such FPIs in the apex company is less than 3% of its total equity share capital.
Monitoring and Disclosure of 3% Limit:
* Custodians and Depositories must track the utilization of the 3% limit for apex companies without identified promoters daily.
* Depositories must publicly disclose when the 3% limit is met or breached before the start of trading the next day.
Investment Restrictions and Disclosure Requirements:
* FPIs meeting the 50% concentration criteria must either realign their investments below the 50% threshold within 10 trading days or make additional disclosures for any prospective investment in the apex company, if the 3% cumulative limit is met through those 10 trading days.
Clarification for FPIs as of October 31, 2023:
* FPIs that met the disclosure criteria as of October 31, 2023, but meet the new exemption conditions as of March 12, 2024, will not face penalties for non-disclosure.
Implementation:
* The pilot Custodians and DDPs Standards Setting Forum (CDSSF) will create a process flow for implementation, to be adopted by all DDPs and Custodians, in consultation with SEBI.
Impact Analysis:
Foreign Portfolio Investors (FPIs)
* Impact: Potential reduction in disclosure burden for FPIs meeting the new exemption criteria. Possible investment realignment or additional disclosure requirements for investments in apex companies exceeding the 3% cumulative limit.
* Action Required: Assess eligibility for exemption based on the new criteria. Monitor investments in corporate groups and apex companies. Realign investments or prepare for additional disclosures if necessary.
Designated Depository Participants (DDPs) and Custodians
* Impact: New responsibilities for tracking and disclosing the 3% limit utilization for apex companies without identified promoters.
* Action Required: Implement systems to track the 3% limit daily. Publicly disclose breaches of the 3% limit. Adopt the process flow developed by CDSSF.
Depositories
* Impact: Required to publish list of corporate groups and their apex companies having no identified promoters.
* Action Required: Make public the list of corporate groups based on the corporate repository published by the Stock Exchanges and their respective apex companies having no identified promoters.
Stock Exchanges and Clearing Corporations, Registrars to an Issue and Share Transfer Agents, Listed Companies
* Impact: No direct impact apparent from the document.
* Action Required: No direct action required, but should be aware of the updated regulations.
Key Entities Referenced
Foreign Portfolio Investors (FPIs): A category of investors that are the primary subject of the circular, regarding disclosure requirements.
Designated Depository Participants (DDPs): Entities that play a role in the implementation and monitoring of the circular's provisions.
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular and responsible for overseeing securities markets in India.
SEBI Circular No. SEBI/HO/AFD/AFDPoD/2/CIR/P/2023/148 dated August 24, 2023: The original circular that this current circular amends, related to additional disclosures for FPIs.
Securities and Exchange Board of India Act, 1992: The legislation under which SEBI derives its powers to issue regulations and circulars.
SEBI (FPI) Regulations, 2019: Regulations pertaining to Foreign Portfolio Investors, under which the circular is issued.
Custodians and DDPs Standards Setting Forum (CDSSF): The body responsible for framing the process flow for implementing the circular.
Stock Exchanges: Entities which publish the list of corporate groups based on the corporate repository and their respective apex companies having no identified promoters.
CIRCULAR
SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/19 March 20, 2024
To,
1. Foreign Portfolio Investors (FPIs)
2. Designated Depository Participants (DDPs) and Custodians
3. The Depositories
4. The Stock Exchanges and Clearing Corporations
5. Registrars to an Issue and Share Transfer Agents
6. Listed Companies
Dear Sir / Madam,
Subject: Amendment to Circular for mandating additional disclosures by FPIs
that fulfil certain objective criteria
1. SEBI vide Circular No. SEBI/ HO/ AFD/ AFD-PoD-2/CIR/P/2023/148 dated August
24, 2023 mandated additional disclosures for FPIs that fulfil objective criteria as
specified in the said Circular. Further, FPIs satisfying any of the criteria listed under
Para 8 of the said Circular were exempted from the additional disclosure
requirements, subject to conditions specified in the said Circular.
2. In this regard, in addition to the criteria listed under Para 8 of the said Circular
dated August 24, 2023, it has been decided that an FPI having more than 50% of
its Indian equity AUM in a corporate group shall not be required to make the
additional disclosures as specified in Para 7 of the said Circular, subject to
compliance with all of the following conditions:
i. The apex company of such corporate group has no identified promoter. For
this purpose, the list of corporate groups based on the corporate repository
published by the Stock Exchanges and their respective apex companies
having no identified promoters shall be made public by Depositories.
ii. The FPI holds not more than 50% of its Indian equity AUM in the corporate
group, after disregarding its holding in the apex company (with no identified
promoter).
Page 1 of 3iii. The composite holdings of all such FPIs (that meet the 50% concentration
criteria excluding FPIs which are either exempted or have disclosed) in the
apex company is less than 3% of the total equity share capital of the apex
company.
3. Custodians and Depositories shall track the utilisation of this 3% limit for apex
companies, without an identified promoter, at the end of each day. When the 3%
limit is met or breached, Depositories shall make this information public before start
of trading on the next day.
4. Thereafter, for any prospective investment in the apex company by FPIs, that meet
the 50% concentration criteria in the corporate group, the FPIs shall be required to
either realign their investments below the 50% threshold within 10 trading days or
make additional disclosures prescribed in the said Circular dated August 24, 2023:
Provided no such requirement, to realign or make disclosure, shall be applicable
unless the 3% cumulative limit for the apex company continues to be met through
the said 10 trading days.
5. All other provisions specified in the said Circular dated August 24, 2023 shall
remain unchanged.
6. For FPIs that met the objective criteria specified under Para 7(a) of the said Circular
dated August 24, 2023, as on October 31, 2023 and neither realigned their portfolio
within the specified time-period nor were exempted, additional disclosures were
required to be made on or before March 12, 2024. It is clarified that such FPIs who
met the conditions specified under Para 2 above, as on March 12, 2024, shall not
be subjected to actions consequent to non-disclosures, as specified in Para 12 and
Para 13 of said Circular dated August 24, 2023.
7. The process flow to implement this circular shall be framed by the pilot Custodians
and DDPs Standards Setting Forum (CDSSF) and adopted by all the DDPs/
Custodians, in consultation with SEBI.
Page 2 of 38. The provisions of this circular shall come into force with immediate effect.
9. This circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992 read with Regulations 22(1),
22(6), 22(7) and 44 of SEBI(FPI) Regulations, 2019 to protect the interest of
investors in securities and to promote the development of, and to regulate the
securities market.
10. This circular is available at www.sebi.gov.in under the link “LEGAL > Circulars”.
Yours faithfully,
Manish Kumar Jha
Deputy General Manager
Tel No.: 022 –26449219
E-mail: manishkj@sebi.gov.in
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