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India tightens foreign investor rules after Hindenburg report on Adani Group

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In the context of the Adani-Hindenburg issue, wherein US-based short seller Hindenburg Research Group released a report alleging stock manipulation by entities related to Adani Group, SEBI introduced a new disclosure regime for “high risk” foreign investors. This regime seeks to enhance transparency by restricting foreign funds from concealing the true extent of their ownership by using intricate corporate setups. In its regulatory wisdom, SEBI notified certain amendments to the SEBI (Foreign Portfolio Investors) Regulations, 2019 and clarified disclosure requirements through circulars, which were detailed by Regstreet Law Advisors at various places including in an article authored by Mr. Sumit Agrawal for moneycontrol.com (accessible at: Will SEBI walk the talk on disclosure of beneficial ownership in FPIs?)

In this background, Mr. Sumit Agrawal, Managing Partner of Regstreet Law Advisors and former SEBI Officer has offered his insights to the Financial Times, London. He said, “The regulatory shake-up has spooked some investors. There is a shared apprehension that an overly rigorous approach from Sebi could potentially disrupt their carefully crafted investment strategies.”. He further added that the stricter regime sends a clear message that India is committed to transparency and is open to quality investments, which could bolster confidence among investors. However, the regulator would need to strike a balance to avoid overregulation that could stifle market dynamics.

According to Mr. Cyril Shroff, Managing Partner of Cyril Amarchand Mangaldas, in his expert view in the article opined that SEBI appeared to have “charted its own path on a disclosure regime disproportionate to the needs of the capital markets” and added that the change was “susceptible” to legal challenge. While Mr. Moin Ladha of Khaitan & Co., echoed the concern on implementation and enforcement of a new disclosure regime on the FPIs.

The article by Financial Times, London is enclosed below and is also accessible at: India tightens foreign investor rules after Hindenburg report on Adani

Readers are welcome to share their views with Regstreet Law Advisors at info@regstreetlaw.com

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