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Sebi finalises SOP to stop promoter misuse of foreign cos for shareholding

With this, these investors will not be able to use overseas insurance companies to secretly own shares of a company and manipulate its share prices

FPI

BS Web Team New Delhi

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The Securities and Exchange Board of India (Sebi), along with custodians of foreign portfolio investors (FPIs), have finalised a standard operating procedure to stop promoter families and investors from misusing foreign investment entities, The Economic Times (ET) reported on Wednesday citing people aware of the matter.

With this, these investors will not be able to use overseas insurance companies to secretly own shares of a company and manipulate its share prices.

This comes against the backdrop of new disclosure norms that will kick in from November 1. Under these norms, if FPIs breach certain investment limits, they will have to reveal the identities of individuals who may have put their money or have any control over it.

These norms will kick in if FPI exposure crosses Rs 25,000 crore. The rules will also be applicable if an FPI has invested 50 per cent of its India assets under management in a single corporate group.

However, overseas insurance/reinsurance, pension funds and exchange-traded funds are exempted from these norms.

According to the ET report, the SOP says that foreign insurers and pooled vehicles, coming in as FPIs, will not be asked to disclose details of their beneficial owners only if they can establish that "the FPI is not maintaining a segregated portfolio with one-to-one correlation with a single investor".

A protected cell structure, with different cells or schemes like a mutual fund, or variable capital company seeking exemption, will have to ensure that "a common portfolio is maintained across investors" at each cell and each sub-fund, the report added.

However, if it is found that an investor controls an insurer or a pooled vehicle, they will have to disclose the identities of all persons behind the structure when investment limits are breached.

If the investment limit is breached before October 31, they will have to bring down the exposure within 90 days. If it cannot, the details of all beneficiary owners will have to be disclosed by March 11, 2024. If the limit is breached after November 1, the exposure will have to be brought down within 10 days, ET said.

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First Published: Oct 25 2023 | 11:02 AM IST

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