SEBI board decisions: FPI disclosure threshold doubled, high-level committee to review conflict of interest

The Securities and Exchange Board of India (SEBI) on Monday approved a series of regulatory reforms, including changes to Alternative Investment Funds (AIF) regulations, foreign portfolio investor (FPI) disclosure norms, and fee structures for investment advisers and research analysts.

Norms eased for Category II AIFs

SEBI eased norms for Category II AIFs, allowing them to invest in listed debt securities rated 'A' or below.

The relaxation follows amendments to the Listing Obligations and Disclosure Requirement (LODR) Rules, which had shrunk the pool of unlisted securities available for investment.

Category II AIFs, mandated to allocate over 50% of their corpus to unlisted securities, will now have greater leeway to deploy funds in higher-risk listed debt instruments.

Briefing the media in Mumbai, SEBI chairperson Tuhin Kanta Pandey said, "In terms of AIF (Alternative Investment Funds) regulations, Regulation 17(A) of SEBI AIF Regulations, we have this category of AIFs which are required to hold a majority of their investments in unlisted securities. Now there have been recent changes to SEBI listing obligations and disclosure requirement regulations in which we required that the entity that has listed debt securities can issue fresh debt only in listed form."

This was the first board meeting under the newly-appointed chairperson.

FPI disclosure threshold

The SEBI board approved doubling the investment threshold for granular disclosures by FPIs from ₹25,000 crore to ₹50,000 crore.

At present, certain FPIs with equity assets under management (AUM) exceeding Rs 25,000 crore are required to provide granular details of all their investors or stakeholders on a look-through basis.

"Cash equity markets' trading volumes have more than doubled between FY 2022-23 and the current FY 2024-25. In light of this, the board approved a proposal to increase the applicable threshold from the present ₹25,000 crore to ₹50,000 crore," Pandey told reporters.

"Thus, FPIs holding more than Rs 50,000 crore in equity AUM in the Indian markets will now be required to make additional disclosures," he added.

Pandey had earlier said that SEBI was "happy to engage with FPI and AIF industry participants to address their difficulties" as foreign investors pulled out ₹34,574 crore from the Indian equity markets in February.

Conflict of interest

The committee is expected to submit its recommendation within three months from the date of the constitution.

It will comprise eminent persons and experts with relevant backgrounds and experience in constitutional or statutory or regulatory bodies, government/ public sector, private sector and academia.

The names of the committee members will be announced in due course, Pandey said.

"The objective of the high-level committee is to comprehensively review and make recommendations for enhancing the existing framework for managing conflict of interest, disclosures and related matters towards ensuring the high standard of transparency, accountability and ethical conduct of members and officials of the board," he added.

The move comes against the backdrop of allegations of conflict of interest against former SEBI chief Madhabi Puri Buch by Hindenburg Research in Adani controversy.