India's securities regulator, SEBI, has granted exemptions to certain global funds from stricter disclosure requirements concerning offshore funds that invest significantly in a single company within the country.
The new rules, which were initially proposed in May, are set to take effect from November 1, according to a circular issued by the Securities and Exchange Board of India (SEBI) on Thursday.
The decision to implement these proposals followed allegations made by U.S. shortseller Hindenburg Research that the Adani group had utilized offshore funds to breach India's minimum public shareholding regulations. The Adani group has refuted these allegations.
Under the upcoming regulations, offshore funds that allocate more than 50% of their investment budget for India to a single corporate group will be required to disclose their investors within 90 days of the rules coming into effect. This disclosure will be made to custodian banks or entities responsible for managing their fund flows, as specified by SEBI.
However, hedge funds that have concentrated all their Indian investments in a single company or corporate group will be subject to fewer disclosure requirements.
SEBI has stipulated that regulated funds with holdings in an Indian corporate group amounting to less than 25% of their total global assets under management will be exempt from disclosing their investors.
The move to provide exemptions for regulated pooled investment vehicles adhering to specific criteria has been positively received by industry experts. Prakhar Dua, a partner at Indian law firm Nishith Desai Associates, noted that this step by SEBI addresses feedback from the industry following the release of the consultation paper on the matter.
To ensure uniformity in practice and prevent regulatory discrepancies among custodians, SEBI has instructed custodian banks to collaborate with the regulator in drafting a standard operating procedure (SOP) for disclosure-related processes.
The finalization of these rules comes ahead of SEBI's anticipated report on its investigations into the Adani group. This report is scheduled to be submitted to the Supreme Court by August 29. The Supreme Court has additionally tasked SEBI with evaluating regulatory gaps to ensure investor protection.
