The Securities and Exchange Board of India (SEBI), the country’s markets regulator, has granted offshore funds an additional seven months to comply with disclosure requirements around investor data, according to reports. This extension aims to avoid unnecessary disruption in the markets from forced selling of holdings by funds unable to meet immediate deadlines.
SEBI had issued guidelines last year asking offshore funds investing over 50% of their assets under management in a single Indian group and with holdings exceeding INR 250 billion to disclose information about underlying investors. The original intent was to introduce greater transparency around significant foreign ownership. An initial deadline was set for January 29th, 2023 for funds to share such details.
However, recognizing the complexities involved for some global investors, SEBI has adopted a more pragmatic approach. Sources indicate no penalties will be enforced if disclosures are not furnished by the January date. Funds will have an extra 10-30 days initially to submit investor information. More importantly, those still unable to comply even after this grace period have been afforded an additional six months to slowly reduce their positions in an orderly manner.
This calibrated stance avoids the risks of a “cliff-edge” scenario and prevents potential disruptions from distressed selling. Forcing massive liquidation to meet rigid timelines could unsettle markets and impact share prices across sectors. The step provides welcome relief to funds that may need more time to gather documentation from different global shareholding tiers in compliance with local jurisdiction rules, which is essentially needed.
The move underscores regulators weighing gradual implementation versus abrupt enforcement, especially when dealing with regulations having cross-border implications. SEBI is adopting a more consultative approach than initial deadlines suggested, engaging with stakeholders to understand practical difficulties. This will ensure the disclosure directive’s objective of transparency is still served without sudden volatility impacts. The balanced approach maintains foreign investor confidence by addressing legitimate compliance issues through open channels of dialogue.
So in the end going forward, SEBI will monitor the position of funds granted the six-month grace period. Further extensions appear unlikely if investor data is not provided over the course of the year. However, this initial display of flexibility enhances credibility in regulations while upholding market stability, validated interests of global pools of capital and the developmental role of foreign investments. A reasonable implementation timeframe prevents unintended fallouts and achieves the right policy balance.
