sebi on fpis: Sebi considers relaxation on schedule for disclosure of material changes in FPIs.
Sebi, in its consultation document, proposed to classify significant changes notified by FPIs into two groups and set a schedule for reporting changes.
Type I includes changes that require FPIs to file new registrations or affect privileges or exemptions available to such foreign investors, while Type II includes all other material changes.
The regulator proposed that FPIs would be required to report Type I changes within seven working days and provide supporting documentation within 30 days, and for Type II changes they would be required to provide notice and supporting documentation within 30 days.
Currently, FPIs have up to seven business days to submit information regarding material changes in structure, ownership, control or investor group.
Some Type 1 material changes include changes in jurisdiction. Name changes due to mergers, acquisitions, divisions, or ownership. Sebi said a comprehensive list of Type I material changes should be prepared in consultation with industry players. The proposal comes after market participants faced difficulties in adhering to prescribed disclosure timelines, particularly in relation to changes in beneficial ownership.
Market participants highlighted that the seven business day notification requirement increases compliance issues as it can take weeks to collect the necessary information from companies spread across multiple jurisdictions.
This becomes even more difficult when documents containing wet ink signatures of authorized signatories must be transmitted across jurisdictions.
In a separate consultation paper, the market regulator proposed measures to facilitate disposal of securities after expiration of FPI registration.
The regulator has also proposed a framework for dealing with securities frozen in FPI accounts after expiration of prescribed liquidation schedules and a framework for dealing with securities written off by FPIs.
The FPI Rules, 2019 do not contain any provisions to regularize registration of FPIs or dispose of securities after expiry of registration.
Additionally, there are no regulatory guidelines on handling securities remaining in FPI demat accounts after expiry of registration or prescribed liquidation schedule or on handling securities written off by FPIs.
As securities frozen or written off in FPI accounts continue to be permanently frozen, the share capital of such companies is also blocked from trading.
The Demat account of an FPI remains open (frozen) even after the FPI abandons its registration. This is undesirable as it makes the accounts vulnerable to misuse, Sebi noted.
Sebi has sought public comments on these proposals till February 28.
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