homemarket NewsSEBI fears about money laundering are valid but this is a long road, says Sandeep Parekh
SEBI fears about money laundering are valid but this is a long road, says Sandeep Parekh
Sandeep Parekh, managing partner of Finsec Law Advisors, is of the view that SEBI concerns regarding money laundering are valid, however, there are no real hurdles for FPIs to make disclosures.
The Securities and Exchange Board of India (SEBI) released a new consultation paper on a framework for mandating additional disclosures from foreign portfolio investors (FPIs) on May 31.
Sandeep Parekh, managing partner of Finsec Law Advisors and former executive director at SEBI, says that with the new consultation in place, the markets regulator wants to address the concerns regarding ownership in listed stocks.
“They (SEBI) want to address the concerns with respect to who actually owns it, and people are not hiding behind shadows, that's probably a motive. But at the same time, they should also seek feedback from the international investors through what challenges this could pose,” he told CNBC-TV18 soon after the markets regulator released the paper.
He is of the view that SEBI concerns regarding money laundering are valid, however, there are no real hurdles for FPIs to make disclosures.
According to the proposed rules, FPIs with a Rs 25,000 crore equity holding in India must make additional disclosures. The market regulator also cited framework to guard against possible circumvention of Minimum Public Shareholding (MPS) norms.
The development comes days after a Supreme Court-appointed panel, which was tasked to see if India's market regulator played its role in protecting interest of small investors in Adani Group stocks, has made its report public. The panel has found that SEBI suspects 13 foreign funds invested in the Adani Group may have links with the promoters.
Also Read | Adani-Hindenburg impact: Sebi paper seeks enhanced transparency measures for foreign portfolio investors
While the allegations made by the US-based short seller Hindenburg reinforced SEBI's suspicions, the foreign funds have not been able to demonstrate that their beneficial owners aren't funded by the Adani Group, the panel said on May 19.
Reflecting on the new paper, Parekh explained, “This is still a consultation paper. From here, the next step is to accept the comments and then it goes to the SEBI board. So this is a long way away. And typically, from what we've seen in the past year or so SEBI gives a glide path. They give six months to a year, sometimes even longer to implement the law.”
According to him, the proposed rules may not really be looking specifically at the Adani-Hindenburg investigation, but the regulator is indeed looking at increasing transparency.
It must be noted that if the paper is implemented, the rules will come into effect only in due course post consultation. It will become applicable if concentration continues post new rule and therefore it is unlikely to apply retrospectively.
First Published: May 31, 2023 9:56 AM IST
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