SEBI Has Eased Specific Disclosure Requirements For Foreign Portfolio Investors

The Securities and Exchange Board of India (SEBI) has granted relief and eased the process for foreign portfolio investors (FPIs) by approving a proposal to extend the timelines for disclosing material changes. This decision was made during the Board meeting held on Friday.

Foreign portfolio investors (FPIs) comprise securities and other financial assets held by investors in a different country, providing indirect ownership of a company’s assets and liquidity depending on market volatility. Alongside foreign direct investment (FDI), FPI is a common method to invest in offshore economies.

Currently, FPIs are required to disclose material changes to their designated depository participant (DDP) within seven working days. Under the new proposal, material changes will be categorized into Type I and Type II.

Type I material changes must still be reported to the DDP within seven working days, with supporting documents required within 30 days. Type II material changes, on the other hand, must be reported along with supporting documents within 30 days.

Vivek Singhania, Co-founder at asset servicing firm Dovetail Group, welcomed SEBI’s decision, citing practical challenges with the current 7-day deadline and the benefits of extending the reporting timeframe to 30/45 days for FPIs.

Additionally, SEBI’s Board approved exempting additional disclosure requirements for FPIs with over 50% of their India equity assets under management (AUM) in a single corporate group, provided the concentrated holdings are in a listed company with no identified promoter, albeit with certain conditions.

Another significant decision by SEBI was the launch of a Beta version of optional T+0 settlement, initially limited to 25 shares and a select group of brokers. T+0 settlement requires transactions to be completed within the same day. SEBI will review progress after three and six months, considering stakeholder feedback.

SEBI’s efforts to advance securities markets and investor protection have seen several changes in settlement cycles, from T+5 to T+3 in 2002, T+2 in 2003, and T+1 in 2021.

The introduction of optional T+0 settlement aims to leverage evolving payment systems and technology to enhance clearing and settlement timelines.

SEBI had previously sought public feedback on two propositions: Phase 1 involves optional T+0 settlement for trades until 1:30 PM, settling funds and securities on the same day by 4:30 PM. Phase 2 introduces immediate trade-by-trade settlement, with trading until 3:30 PM.

SEBI Chairperson Madhabi Puri Buch indicated the regulator’s work on instant settlements, foreseeing a future where transactions on stock exchanges could settle instantaneously, putting money into investors’ hands in real-time.