SEBI relaxes certain disclosure norms for foreign portfolio investors

Mumbai (Maharashtra) [India], March 16 : In relief and to facilitate ease of doing business for foreign portfolio investors (FPIs), the Board of capital market regulator Securities and Exchange Board of India (SEBI) approved a proposal to relax the timelines for disclosure of material changes by such overseas investors.
The decision was taken at its Board meeting held on Friday.
Going by the definition, FPIs consist of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company's assets and is relatively liquid depending on the volatility of the market. Along with foreign direct investment (FDI), FPI is one of the common ways to invest in an offshore economy.
Currently, FPIs must disclose to their designated depository participant (DDP), material changes to information provided earlier, within seven working days.
Going forward, material changes required to be notified by the FPIs shall be categorised into two buckets, -- Type I and Type II.
Type I material changes, shall continue to be informed by FPIs to their DDP within seven working days of the occurrence of the change. However, supporting documents for the same (if any) shall now be required to be provided within 30 days of such change.
Other material changes (categorised as Type II) shall be informed along with supporting documents (if any) by FPIs to their DDP within 30 days of such changes.
"We welcome SEBI's decision to consider relaxing the timelines for disclosure of material changes by FPIs. The current 7-day deadline poses practical challenges, particularly with multiple teams involved across different jurisdictions. Extending the reporting timeframe to 30/45 days offers a more reasonable window, greatly benefiting FPIs," said Vivek Singhania, Co-founder at the asset servicing firm Dovetail Group.
The SEBI Board also approved a proposal to exempt additional disclosure requirements for FPIs having more than 50 per cent of their India equity asset under management (AUM) in a single corporate group, in case the concentrated holdings of the FPIs are in a listed company with no identified promoter, though, with certain riders.
Among other decisions, taking into account stakeholder feedback, SEBI approved the launch of a Beta version of optional T+0 settlement, for a limited set of 25 shares, and that too with a limited set of brokers.
The T+0 system means that the settlements must be done within the same day, of the completion of a transaction.
Those 25 shares that would be part of the Beta version have not been named yet by the regulator.
In parallel, the regulator SEBI said it shall continue to do further stakeholder consultation, including with the users of the Beta version.
The Board of the SEBI will review the progress at the end of three months and six months from the date of this implementation, and decide on further course of action.
SEBI, in its endeavour to keep pace with the changing times and carry out its mandate of development of securities markets and investor protection, shortened the settlement cycle to T+3 from T+5 in 2002 and subsequently to T+2 in 2003. Further in 2021, T+1 settlement was introduced in a phased manner which was fully implemented from January 2023.
It was of the view that the significant evolution of payment systems in the country in recent years coupled with sophisticated and robust technologies used by market infrastructure institutions (MIIs) appear to present further opportunities for advancing the clearing and settlement timelines, on an optional basis.
Against that backdrop, SEBI in December 2023 floated two propositions before the public and sought their suggestions.
The proposal to be implemented in two phases were: In Phase 1, an optional T+0 settlement cycle (for trades till 1:30 PM) is envisaged, with the settlement of funds and securities to be completed on the same day by 4:30 PM.
In Phase 2, an optional immediate trade-by-trade settlement (funds and securities) may be carried out. In the second phase, trading was to be carried out till 3.30 pm
After the implementation of phase 2 (optional instant settlement), the mechanism of optional T+0 settlement implemented under phase 1 was to be discontinued.
Besides, SEBI Chairperson Madhabi Puri Buch last year said the financial markets regulator was working on a mechanism for instant settlements of transactions on the stock exchanges.
She had said they were working on a mechanism for instant settlements and were engaged with the ecosystem.
"We believe that in the not very far future we will have a mechanism which will facilitate instantaneous settlement of transactions on the stock exchanges. That's where we are headed," she had said in July 2023.
The instantaneous settlement, once it is implemented, will put money into the hands of the investors on a real-time basis.