Adani-Hindenburg row: SEBI rejects SC panel findings on FPI’s beneficial owners

market regulator Sippy Decline a report supreme court– The panel of experts determined that the difficulties encountered in identifying beneficial owners (BOs) of foreign investment enterprises in the Adani case were in part due to the repeal of the rules in 2019. In a counter-affidavit filed by the market regulator, SEBI said there was no requirement to disclose the last natural person above each person who possesses any economic interest in FPI.

“The challenges before the Committee of Experts with regard to obtaining details about economic stakeholders, did not stem from the repeal of the ambiguous structure provisions in 2019. Instead, the problem arose primarily from having thresholds for identifying BOs. In fact, the thresholds were only lowered ( i.e. tightened) between 2014 and 2019. In addition, there was never any “requirement to disclose the last natural person above all who possesses any economic interest in the FPI,” the SEBI said in an affidavit to the Supreme Court.

The panel of experts has been appointed by the Supreme Court to examine whether there have been any regulatory loopholes following Hindenburg Research’s allegations against the Adani Group. Hindenburg alleged that the Adani Group entities may have violated public ownership rules by stopping shares in foreign investment vehicles controlled by family members.

beneficiary owners

The Supreme Committee report indicated that although the 2018 regulation eliminated the need for foreign portfolio investors (FPIs) to disclose the ultimate beneficiary, investigations in 2020 sought to uncover the ultimate beneficiary by scrutinizing the layers involved.

SEBI responded to this by saying that it has noted that in some cases, entities with an economic interest in the FPI are in jurisdictions where equivalent PMLA regulations require a BO to be identified solely on the basis of control or ownership, leaving ambiguity as to which entities have an economic interest but not apparent control. .

Thus, an investment manager/trustee acting through arrangements such as voting stock/management stock, is identified as the BO of the FPI. Thus, while complying with the regulations, actual investment components with economic interest may not be identified as the BOs of an enterprise. FPI. This problem becomes more prominent if the holdings of these investors are spread through several foreign investment institutions,” SEBI said, adding that it has bridged this gap through a recent decision requiring foreign investment institutions to invest more than 50 percent of their total subject assets. For management in one group disclosure of beneficial ownership.

In its 43-page filing, SEBI also rejected the expert panel’s recommendations on other issues including setting a firm timeline for the regulator to complete its investigations. Setting such limits, the SEBI said, could harm the quality of the investigation, create restrictions and increase litigation