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SEBI raises narrow categorisation, operational issues and jurisdictional challenges as the key concerns for foreign portfolio investors(FPIs).

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In background of this proposal, BQ Prime has featured an article authored by Sahyaja M S titled, “SEBI Proposals For FPIs: Experts Raise Jurisdictional, Enforcement Concerns,” analysing the various propositions put forward by the experts.

In its consultation paper, SEBI has proposed enhanced disclosures and risk based categorisation of the FPIs. For the high-risk category, SEBI has proposed disclosure of information about the ownership, economic interest, and control of the FPI at a granular level. This disclosure, according to the proposal, will need to be made by FPIs that have 50% of their investments concentrated in a single corporate group or company, or those who have an overall holding of over Rs 25,000 crore in the Indian market. The second concern revolves around operational issues and finally, it talks about the jurisdictional challenges.

In this regard, Mr. Sumit Agrawal, Founder of Regstreet Law Advisors and former SEBI officer was quoted by BQ Prime observing that, “The threshold can be avoided by parties by spreading their investments across various FPIs while ensuring the threshold of 50% exposure in a single group is not crossed and the fund size remains below Rs 25,000 crore. It may also impact existing FPI holdings in the market.” He further added, “The proposal to compulsorily reduce corpus on violations might force certain big FPIs to sell as they might not be able to obtain all the details required at a granular level, considering the complicated legal structure of certain entities spread across various jurisdictions. In relation to jurisdictional challenge, he said, “These requirements can be challenged by entities located in other jurisdictions as violative of their local laws as well as their right to privacy.”

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

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