On August 1, 2024, the Securities and Exchange Board of India (SEBI) issued a new circular amending disclosure requirements for Foreign Portfolio Investors (FPIs). This update, SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/104, introduces significant changes to the previously established rules under the FPI Master Circular. The modification aims to streamline compliance for certain categories of FPIs, specifically university funds and related endowments.
1. Background and Context
The initial directive on additional disclosures for FPIs was issued through Circular No. SEBI/HO/AFD/AFD-PoD-2/CIR/P/2023/148 dated August 24, 2023. This directive required FPIs meeting certain criteria to provide more extensive disclosures to enhance transparency and regulatory oversight. However, certain FPIs, particularly those meeting specified criteria, were exempt from these additional requirements.
The 2024 circular updates these provisions, reflecting a shift towards more nuanced regulatory practices. It emphasizes SEBI’s intent to balance investor protection with operational efficiency.
2. Key Amendments
The recent circular introduces notable amendments regarding disclosure requirements:
- Exemption for University Funds: University Funds and related Endowments that are registered or eligible as Category I FPIs are now exempt from certain additional disclosure requirements. This exemption is subject to specific conditions aimed at ensuring compliance without compromising transparency.
- Conditions for Exemption: To benefit from this exemption, the following conditions must be met:
- Indian Equity AUM Threshold: The fund’s assets under management (AUM) in Indian equities must be less than 25% of its global AUM.
- Global AUM Requirement: The fund’s global AUM must exceed INR 10,000 crore.
- Tax Compliance: The fund must provide appropriate tax filings or returns in its home jurisdiction, confirming its status as a non-profit entity exempt from taxes.
3. Jurisdictional Specifications
SEBI will define the eligible jurisdictions for these exemptions in consultation with custodians and DDPs, as specified by the Standard Operating Procedures under the FPI Master Circular. This approach ensures that the regulatory framework remains aligned with international standards and practices.
4. Implementation and Enforcement
The provisions of this circular take effect immediately, reflecting SEBI’s commitment to timely updates in regulatory requirements. This immediate implementation underscores the need for FPIs and related entities to promptly adapt to the new guidelines to ensure compliance.
Conclusion
The SEBI circular dated August 1, 2024, marks a significant update in the regulatory landscape for FPIs, particularly concerning university funds and related endowments. By modifying the disclosure requirements, SEBI aims to reduce the regulatory burden on these entities while maintaining rigorous standards of transparency and compliance. The amendments reflect SEBI’s ongoing efforts to refine its regulatory framework in response to evolving market dynamics and operational needs of FPIs. Entities affected by these changes should review the new provisions carefully and ensure that they meet the specified conditions to benefit from the exemptions provided. For further details, the full text of the circular is available on the SEBI website under the “LEGAL > Circulars” section.
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Securities and Exchange Board of India
Circular No. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/104 Dated: August 01, 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. The said circular has been subsumed subsequently in the Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors (“FPI Master Circular”) dated May 30, 2024.
2. In this regard, it has been decided that University Funds and University related Endowments shall not be required to make the additional disclosures as specified in Para 1(xiii) of Part C of the FPI Master Circular, subject to compliance with certain conditions. In view of the above, the FPI Master Circular stands modified as follows:
2.1. After clause (g) of Para 1(xiv) of Part C, the following shall be inserted:
“(h) University Funds and University related Endowments, registered or eligible to be registered as Category I FPI, subject to them fulfilling the following additional conditions:
i. Indian equity AUM being less than 25% of global AUM
ii. Global AUM being more than INR 10,000 crore equivalent
iii. Appropriate return/filing to the respective tax authorities in their home jurisdiction to evidence the nature of a non-profit organisation exempt from tax.”
3. The eligible jurisdictions with respect to the exemption granted to University Funds and University related Endowments shall be as specified by SEBI from time to time, in consultation with the pilot Custodians and DDPs Standards Setting Forum, through the Standard Operating Procedure framed in terms of Para 1(xii) of Part C of the FPI Master Circular.
4. The provisions of this circular shall come into force with immediate effect.
5. 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.
6. This circular is available at sebi.gov.in under the link “LEGAL > Circulars”.
Yours faithfully,
Manish Kumar Jha
Deputy General Manager
Tel No.: 022 –26449219
E-mail: [email protected]
