Mumbai: In verifying the global assets under management (AUM) of foreign portfolio investors (FPIs), the custodians of the funds can rely on regulatory filings available on the websites of regulators for information about the regulated investment manager or trust bank or trustee of the fund, according to a revised standard operating procedure.
Determining the global AUM is significant because a ‘regulated’ fund whose exposure to an Indian business group and to the Indian equity market is below 25% and 50% respectively of its global AUM is spared of the granular disclosure rules laid down by the Securities and Exchange Board of India (Sebi).
Under the disclosure regulation, an FPI has to reveal the ultimate beneficial ownership of every fund investor, down to the last natural person, when over 50% of an FPI’s India equity AUM is comprised of stocks of a single corporate group; or, when the Indian AUM of an FPI exceeds ₹25,000 crore.
A standard operating procedure, prepared by custodians in consultation with Sebi, has laid down the conditions under which FPIs breaching the limits would be exempted.
The earlier SOP had said that custodians have to check the global AUM from regulatory filings available on the websites of respective regulators or filing systems operated by such regulators. In case information on global AUM is not publicly available, the SOP has clarified that certified copies that can be relied upon are limited to regulatory filings available on the regulator’s website of FPI or investment manager, trust bank or trustee. Certification can be done only by people authorised to do so as per Sebi’s master circular for FPIs. Such authorised persons are notary public, officials of foreign multinational banks or any bank regulated by the Reserve Bank of India.
Sebi-registered FPIs which are in the nature of sovereign wealth funds, pension funds, or insurance/reinsurance entities not linked to a single investor are exempted from the details of ultimate beneficial ownership disclosures. However, FPIs structured as pooled vehicles have to fulfil the conditions laid down in the SOP. Unregulated funds with regulated investment managers are not exempt from making the additional disclosures, irrespective of their jurisdiction.
The requirement of the pooled investment vehicles to be regulated in its home jurisdiction as an eligibility condition for exemption from making additional disclosures was mentioned in the Sebi Board memorandum and the circular dated August 24, 2023. A large number of FPIs are pooled vehicles.
Of the 11,000-odd FPIs registered with Sebi, more than 3,400 are from the US, 604 from Mauritius, 571 from Singapore and 379 from the Cayman Islands, according to NSDL data.
