NEW DELHI: Capital market regulator Securities and Exchange Board of India (Sebi) has denied the insinuation made by the Supreme Court-appointed expert committee that identifying the real person or entity behind an overseas investor has become difficult due to a regulation change made in 2019.
Sebi on Monday told the apex court by its review of regulations on FPI (foreign portfolio investors) ownership in 2018, it made it mandatory for overseas funds to disclose the beneficial owner of the fund upfront. It pointed out that the 2019 change in regulations was meant to remove redundancy and ambiguity in the law. The SC-appointed panel is looking into the regulatory mechanism of Sebi to protect investors’ interest in the wake of the Hindenburg report on the Adani group. The panel submitted its report on May 19, 2023, and thereafter, it was provided to Sebi for its views on the same.
The regulator in 2019 removed the opaque structure clause added to the FPI regulations in 2014. The clause reiterated that FPIs should not have opaque structure(s). The Sebi in its filing with the Supreme Court said once the 2018 regulations had made it mandatory for foreign investors to disclose upfront beneficial owners of the fund, there was no need for the opaque structure clause in the regulations.
It reiterated that changes made in FPI Regulations in 2018 and 2019 have tightened the disclosure requirement related to beneficial owners. Sebi has opposed the panel’s suggestion of a timeline for the completion of the investigation in cases of violation of securities market rules. “The nature, scope and complexity of cases in the securities market vary significantly, and reasonable time to complete investigation would depend on the facts of each specific case and availability of information.
Therefore, prescribing specific timelines to complete the investigation may compromise the quality of the investigation,” Sebi told the court. Meanwhile, the main petitioner in the case – Vishal Tiwari – also provided his views on the report. He stressed the findings of the report which says Sebi has been suspecting 13 overseas entities of having links to the promoters of the Adani Group, and that the shareholding in the listed Adani stocks in the hands of these 13 overseas entities need not qualify as public shareholding.
FPI rules
Sebi denies expert panel report insinuating rule change in 2019 made identifying beneficial owners of FPIs difficult
Sebi says it made it mandatory in 2018 for overseas investors to disclose beneficial owners upfront
The capital market regulator in 2019 had removed the opaque structure clause added to FPI regulations in 2014
Sebi opposes the expert panel recommendation that there should be a timeline for the completion of investigations
The Supreme Court-appointed committee had submitted its report on May 19, 2023
Regulator in 2019 removed opaque structure clause added to the FPI regulations in 2014