Sebi eases disclosure norms for certain FPIs, approves T+0 settlement

The Securities and Exchange Board of India (Sebi) on Friday approved a slew of proposals, including exempting certain foreign portfolio investors (FPIs) from additional disclosure requirements, launch of beta version of the T+0 settlement, and facilitation of ease of doing business for companies going public.

For ease of doing business, the markets regulator in its annual board meeting approved a proposal to exempt additional disclosure requirements for FPIs having more than 50% of their Indian equity assets under management (AUM) in a single corporate group, in case the concentrated holdings of the FPIs are in a listed company with no identified promoter, if certain conditions are met. A consultation in this regard was floated by Sebi in August 2023.

“Such FPI holds not more than 50% of its India equity AUM in the corporate group, after excluding its holding in the parent company with no identified promoter”, Sebi said in its 8-page statement.

The regulation has been brought in place especially after the Adani-Hindenburg case last year, in which Sebi was unable to determine the beneficial owners of some foreign portfolio investments in Adani stocks due to the laxity of current regulations in identifying the genuine owners of numerous investments.

However, exemption from enhanced disclosures have been provided to FPIs that are sovereign wealth funds (SWFs), listed companies on certain global exchanges, public retail funds, and other regulated pooled investment vehicles with diversified global holdings.

Moreover, the regulator, in line with its announcement made on Monday, has launched the beta version of the T+0 settlement cycle for investors. The T+0 settlement essentially means that the fund and securities for a transaction will be settled on the same day as it is traded. This will go live from 28 March, according to the regulator.

Parallelly, Sebi will continue its deliberations with the users of the beta version, and figure out the next course of action in 3-8 months.

In terms of the timelines for disclosures by the FPIs, they shall be categorized into two buckets,-- Type I and Type II. The Type I material changes shall continue to be informed by FPIs to their designated depository participants (DDP) within seven working days of the occurrence of the change. However, supporting documents for the same shall now be required to be provided within 30 days of such change. Other material changes (categorized as Type II) shall be informed along with supporting documents by FPIs to their DDP within 30 days of such change.

Additionally, for FPI registrations that expire due to non-payment of fees, Sebi will now allow them to be reactivated within 30 days from such expiry. This is yet another move to improve the ease of doing business by the regulator.

Sebi added that “such FPIs shall also be permitted to dispose of their securities holdings during this 30-day period. Further, in cases where the FPI chooses not to re-activate its registration within 30 days, it shall be permitted a time period of 180 days for disposal of its securities”.

For the purpose of ease of doing business, the regulator has also done away with the mandatory 1% security deposit rule. In fact, based on the recommendations of an expert committee, Sebi had recently sought public comments for removal of the 1% security deposit in public/rights issues that has been in practice for several years.

The move is aimed at encouraging more companies to access the primary markets for raising funds, helping in capital formation and ease of doing business under Sebi’s ICDR (Issue of Capital and Disclosure Requirements) Regulations.

Promoter group entities and non-individual shareholders holding more than 5% of the post-offer equity share capital will be permitted to contribute towards minimum promoters’ contribution (MPC) without being identified as promoters.

For rumour verification, listed entities will have to specify an objective and uniformly assessed criteria for rumour verification in terms of material price movement of equity shares. The promoters, directors and key managerial personnels will have to provide timely verification of rumours having any supposed impact on their scrips.