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Markets regulator seeks beneficial ownership details of foreign investors: Report

Mumbai, Feb 6, 2023

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 Jan. 24.

Foreign investors offloaded Indian equities worth $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, which does not give the regulator the correct picture of who the ultimate owner of the funds were.

There are 11,000 foreign funds registered with the Sebi.


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