A day after the Securities and Exchange Board of India (SEBI) indicated that it may enforce additional disclosure norms for high-risk Foreign Portfolio Investors (FPIs), the Congress Party has claimed that the regulator is now attempting to tighten the very rules it was “forced to dilute” in 2018 to benefit Adani Group. The SEBI on Wednesday came out with a consultation paper that proposes to mandate enhanced disclosures from high-risk Foreign Portfolio Investors (FPIs) to guard against possible circumvention of the Minimum Public Shareholding (MPS) requirement.
In a tweet on Thursday, Congress general secretary Jairam Ramesh said, “The SEBI Consultation Paper put out yesterday proposes to tighten the very rules it was forced to dilute in 2018 to allow foreign portfolio investors to invest in Indian companies without having to reveal their FULL ownership details. This was done to benefit Modani. We hope the Consultation paper is not an eyewash exercise and will cover investments made earlier.”
“This seems to be a response to the findings of the Supreme Court Expert Committee. It also vindicates the Hum Adanike Hain Kaun-HAHK series of 100 questions that we asked of the PM — which he remains totally silent on,” the Congress leader said.
The SEBI Consultation Paper put out yesterday proposes to tighten the very rules it was forced to dilute in 2018 to allow foreign portfolio investors to invest in Indian companies without having to reveal their FULL ownership details. This was done to…
— Jairam Ramesh (@Jairam_Ramesh) June 1, 2023
On Wednesday, the SEBI said, “Such concentrated investments raise concern and possibility that promoters of such corporate groups, or other investors acting in concert, could be using the FPI route for circumventing regulatory requirements such as that of maintaining Minimum Public Shareholding.”
The regulator recommended in its consultation paper obtaining granular information from high-risk FPIs with concentrated equity holdings in single companies or business groups. The regulator has sought public comments on the proposal by June 20.
Also Read: SEBI Proposes To Mandate Additional Disclosure Requirements For High-Risk FPIs
In 2018, the Prevention of Money Laundering (PML) Act revised the definition of the ultimate beneficial owner, considering the beneficial owner as the ultimate beneficial owner. Subsequently, in 2019, the SEBI removed the requirement for mandatory disclosure of ultimate beneficial owners. At that time, foreign entities were only obligated to provide details of the senior managing official and were not required to disclose their stakeholders or contributors to the SEBI.
The PML Rules establish thresholds based on ownership or entitlement to capital or profits (economic interest) to determine the beneficial owner of legal entities. These thresholds are set at 10 per cent for companies and trusts, and 15 per cent for partnerships. Additionally, the rules specify that the beneficial owner includes natural persons who exercise ultimate effective control over a legal entity or arrangement.
The Congress party has been demanding for a joint parliamentary committee investigation into the Adani matter following allegations made by Hindenburg Research in its January 24 report. The report accused the Adani group of fraud, stock manipulation, and money laundering.
Despite the Adani group’s denial of all allegations, the Supreme Court has formed an expert committee to evaluate the existing regulatory framework. Additionally, the court has directed the Securities and Exchange Board of India (SEBI), the stock market regulator, to expedite its investigation into the allegations.
Also Read: 6 Entities Under Lens For Suspicious Trading In Adani Shares: SC-Appointed Committee
The expert committee headed by former SC judge AM Sapre found no regulatory failure during the sharp rise in prices of Adani group companies between March 2000 and December 2022 and their dramatic meltdown after January 24.
“While there was no adverse observation with respect to Adani scips in the cash segment, suspicious trading has been observed on the part of six entities. These are four FPIs, one body corporate and one individual,” the report said.