Sebi has sought public comments on these proposals till February 28
Capital markets regulator Sebi on Wednesday came up with a proposal to relax timelines for disclosure of material changes by foreign portfolio investors (FPIs).
The regulator also proposed a framework to provide flexibility to FPIs in dealing with their securities after the expiry of their registration.
In its consultation paper, Sebi proposed to categorize material changes reported by FPIs into two groups to set timelines for reporting such changes.
Type I includes changes that require FPIs to apply for new registration, or that affect any privileges or exemptions available to such foreign investors, and Type II includes any other material changes.
The regulator has proposed that FPIs must notify Type I changes within seven working days and provide supporting documents within 30 days, while Type II changes require notification and supporting documents within 30 days.
Currently, FPIs are given up to seven working days to submit information to FPIs regarding any material change in their structure, ownership or control or in the investor group.
Some of the material changes of Type 1 include change of jurisdiction; name change as a result of takeover, merger, demerger and ownership.
Sebi said a comprehensive list of Type I material changes should be prepared in consultation with industry participants.
The suggestions came after market participants faced challenges in meeting prescribed timelines for disclosure, particularly with regard to changes in beneficial ownership.
Market participants highlighted that the seven-business-day notification requirement increases compliance challenges as collecting the required information from entities spread across different jurisdictions can take several weeks.
This becomes even more challenging when documents containing wet ink signatures from authorized signatories need to be sent from different jurisdictions.
In a separate consultation document, the market regulator has proposed measures to facilitate the sale of securities after the expiry of FPI registration.
In addition, the regulator has proposed a framework for dealing with securities blocked in the accounts of FPIs, after expiry of prescribed time limits for liquidation, and a framework for dealing with securities written off by the FPIs.
The FPI Regulations 2019 do not contain any provisions for regularizing FPI registration or disposal of securities after the registration has expired.
Further, there are no statutory guidelines for dealing with securities remaining in FPI demat accounts after expiry of registration or after prescribed time limits for liquidation, nor for dealing with securities written off by FPIs.
Since the securities, blocked in the accounts of FPIs or written off by them, remain frozen forever, the share capital of such companies is also blocked from trading.
The demat accounts of FPIs also remain open (in a frozen state) even after the FPIs surrender their registration, which is not desirable as it makes such accounts vulnerable to misuse, Sebi noted.
Sebi has sought public comments on these proposals till February 28.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: February 8, 2024 | 12:32 pm IST