Market regulator Sebi does not expect a large number of foreign portfolio investors to be affected by the new beneficial ownership disclosure norms, according to sources.

The norms are scheduled to come into effect from February 1 and against this backdrop, the equity market has witnessed significant volatility, with the benchmark Sensex falling over 1,000 points on Tuesday after losing early intraday gains.

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Sources in the know said FPIs may be required to provide enhanced disclosures, which is expected to be much lower than estimated in the consultation paper and the October 2023 Sebi board note.

“Exemption from enhanced disclosures has been provided to FPIs which are SWFs (Sovereign Wealth Funds), companies listed on certain global exchanges, public retail funds and other regulated investment vehicles with diversified global holdings,” one of the sources told PTI on Wednesday. Are.” ,

Foreign portfolio investors (FPIs) have been selling shares in recent trading sessions.

In the last four trading days alone, FPIs have sold shares worth over Rs 27,000 crore after infusing huge money, pushing the market indices to record highs as well.

“There is no risk of violation of MPS norms in FPI holdings concentrated in companies with no identified promoters. The exemption from advanced disclosures takes this into account. But for companies without promoters like HDFC Group or ICICI Group, the new disclosure norms will come into effect,” the source said.

MPS stands for Minimum Public Shareholding.

Sources said the problem arises when a fund is not regulated in a jurisdiction but has a regulated fund manager. Explaining the new disclosure norms, he said there is no way SEBI can trace the source of funds or the end user.

Moreover, sources said there is no immediate deadline or hurdle for FPIs to liquidate any holdings from February 1 when the new norms will come into effect.

FPIs that met the enhanced disclosure norms by October 31, 2023, had time till January 31, 2024, to rebalance their holdings if they wished. If they continue to meet the enhanced disclosure criteria by the end of January, they will have an additional 10 to 30 working days to provide the required additional details, sources said.

Even after this, if they fail to provide any details, sources said such FPIs will get six more months to reduce their stake.

One of the sources also said that the reporting time of 7 days for an entity to disclose changes in holdings or ultimate beneficiaries will be increased to 30 days.

Both regulators – the Securities and Exchange Board of India and the Reserve Bank of India – have recently tightened funding and end-user disclosure norms for foreign funds and alternative investment funds (AIFs).

The Indian equity market has been performing well in recent months and has hit record levels multiple times amid positivity about the domestic economy, while global economic and geopolitical uncertainties are weighing on investor sentiments.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI)