India’s markets regulator has written to various custodian banks asking for details on beneficial owners of offshore funds and foreign portfolio investors (FPIs), two sources directly aware of the matter said on Monday.
While not unprecedented, the move comes after a scathing attack by US short-seller Hindenburg Research on the Adani Group, alleging improper use of offshore tax havens and stock manipulation. The conglomerate denies all allegations. However, the report lead to a market rout where seven Adani group companies lost more than $100 billion since January 24.
Foreign investors offloaded Indian equities worth Rs 28,800 crore ($3.51 billion) in January, data showed.
The Securities and Exchange Board of India (Sebi) last week asked custodian banks — typically foreign banks that manage flows from FPIs — to reach out to these investors by March and share the details of their findings by end of September, the sources said, speaking on condition of anonymity as the matter is confidential.
Sebi did not immediately respond to Reuters emails for comment.
“The regulator has sought details of the ultimate beneficial owners specifically in cases where the senior management official or fund manager has been listed as the beneficial owner,” said one of the sources.
In cases where the custodial banks do not provide details of beneficial ownership, the regulator would deem those foreign funds ineligible and ask them to liquidate their holdings in the Indian market by March 2024, the source added.
“One of the key conditions for a foreign portfolio license is that investors need to share beneficial owner details whenever asked for it,” a second source said, adding that currently many funds cite “senior management official” or the fund manager as the beneficial owner.
Client funds
To curb possible misuse of investors’ money by brokers, Sebi has proposed to stop trading members and clearing members from retaining any part of client funds at the end of day and move the entire funds to the clearing corporation on the same day.
