With effect from March 15, 2023, the Securities and Exchange Board of India ("SEBI") amended the SEBI (Foreign Portfolio Investors) Regulations, 2019 ("FPI Regulations") to bring transparency in the ownership structure of a foreign portfolio investor ("FPI"). The amendments provide SEBI with broader powers to require additional information while examining the FPI registration applications and impose stricter reporting timelines for disclosing material changes, including details of the investor group. A summary of the revised reporting timelines and the amendments are set out below:
- Regulation 22(1) has been amended to provide that within 7 (seven) working days, FPIs are required to inform SEBI and the designated depository participant ("DDP"):
a) if any information or particulars previously submitted to SEBI or the DDP are found to be false or misleading, in any material respect;
b) if there is any material change in the information including any direct or indirect change in its structure or ownership or control or investor group, previously furnished by it to SEBI or the DDP;
c) in case of any penalty, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator against it; and
d) in case of any direct or indirect change in structure or common ownership or control of FPI or its investor group.
In addition to (b) above, under the Master Circular for FPIs, DDPs, and Eligible Foreign Investors dated December 19, 2022 ("Master Circular"), 'material change' also includes change in regulatory status, merger, demerger or restructuring, change in category/ sub-category / structure/ jurisdiction/ name of FPI/ beneficial ownership etc. However, no specific timeline was prescribed under the Master Circular for reporting such changes. Accordingly, the timeline prescribed under the FPI Regulations should also be complied with for the disclosures under the Master Circular.
- Further, Regulation 22(1) also now requires FPI to ensure that that accurate details regarding its investor group are maintained with the DDP at all times. However, no specific timelines have been prescribed for this requirement. To ensure compliance, FPIs should routinely submit the relevant details to the DDPs.
- In addition to the obligations imposed on FPIs, DDPs are also required to inform SEBI in writing within 2 (two) working days: (a) if any information previously submitted to SEBI is found to be false or misleading; (b) any material changes to the information previously submitted; and (c) in case of any penalty, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by any regulator against the DDP.
Separately, keeping in mind the recent changes to the beneficial ownership threshold under the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, the DDPs may now require additional information, to ensure compliance with the amended threshold and FPI Regulations.
Please find attached a copy of the amendment to the FPI Regulations.
Originally published 10 April 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.