Introduction: The Securities and Exchange Board of India (SEBI) has released the Securities and Exchange Board of India (Foreign Portfolio Investors) (Second Amendment) Regulations, 2023. This amendment focuses on altering ownership and control criteria for foreign portfolio investors (FPIs), aiming to enhance transparency and regulatory compliance. In this article, we analyze SEBI’s move to revise FPI regulations and its potential impact.
Analysis: SEBI’s amendment to the Foreign Portfolio Investors Regulations, 2019 introduces significant changes. Notably, regulation 4(f) is amended to replace “twenty-five percent or more” with “more than the threshold prescribed under sub-rule (3) of rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.” This implies that FPIs need to comply with anti-money laundering rules for ownership and control identification.
Additionally, regulation 22 introduces sub-regulations (6) and (7), which require FPIs to provide information or documents regarding individuals or entities with ownership, economic interest, or control in the FPI. This information must be furnished in accordance with SEBI’s specifications.
SEBI’s move aligns with its efforts to strengthen the regulatory framework for FPIs. By enhancing ownership and control identification and requiring information disclosure, SEBI aims to prevent potential misuse and ensure compliance with anti-money laundering regulations.
Conclusion: The Securities and Exchange Board of India’s (SEBI) recent amendment to the Foreign Portfolio Investors Regulations reflects its commitment to maintaining a robust and transparent investment ecosystem. The focus on ownership and control criteria, coupled with mandatory information disclosure, is poised to bolster regulatory compliance and prevent illicit activities. SEBI’s proactive approach is expected to enhance investor confidence and strengthen India’s position as an attractive investment destination.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 10th August 2023
Securities and Exchange Board of India (Foreign Portfolio Investors)
(Second Amendment) Regulations, 2023
No. SEBI/LAD-NRO/GN/2023/143.—In exercise of the powers conferred by sub-section (1) of Section 30 read with sub-section (1) of Section 11, clause (ba) of sub-section (2) of section 11 and sub-sections (1) and (1A) of Section 12 of the Securities and Exchange Board of India Act, 1992, and under Section 25 of the Depositories Act, 1996, the Board hereby makes the following regulations, to further amend the Securities and Exchange Board of India (Foreign Portfolio Investors ) Regulations, 2019, namely, –
1. These regulations may be called the Securities and Exchange Board of India (Foreign Portfolio Investors) (Second Amendment) Regulations, 2023.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, –
I. In regulation 4, in clause (f), the words “twenty five percent or more” shall be substituted with the words and symbol “more than the threshold prescribed under sub-rule (3) of rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005”.
II. In regulation 22, after sub-regulation (5), the following sub-regulations shall be inserted, namely, –
“(6) A foreign portfolio investor that fulfils the criteria specified by the Board from time to time, shall provide information or documents in relation to the persons with any ownership, economic interest or control, in the foreign portfolio investor.
(7) The information or documents specified in sub-regulation (6) shall be provided in the manner as may be specified by the Board from time to time.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./341/2023-24]
Footnote:
1. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, the Principal Regulations were published in the Gazette of India on September 23, 2019 vide No. SEBI/LAD-NRO/GN/2019/36).
2. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 were subsequently amended on –
(1) 19th December, 2019 by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/2019/44.
(2) 7th April, 2020 by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2020 vide No SEBI/LAD-NRO/GN/2020/09.
(3) 17th April, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10.
(4) 3rd August, 2021, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, vide No. SEBI/LAD-NRO/GN/2021/30.
(5) 3rd August, 2021 by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2021 vide No. SEBI.LAD-NRO/GN/2021/32.
(6) 26th October, 2021 by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Second Amendment) Regulations, 2021 vide No. SEBI.LAD-NRO/GN/2021/54
(7) 14th January, 2022 by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/64
(8) 9th November, 2022 by the Securities and Exchange Board of India (Payment of Fees (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/99
(9) 14th March, 2023, by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/128.
(10) 4th July, 2023, by the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/137.
