India's markets regulator on Wednesday strengthened disclosure requirements for a set of "high-risk" offshore funds investing in local markets to prevent attempts to dodge regulations on mandatory public shareholding.
The move is aimed at unraveling opaque structures through which some offshore funds invest in India-listed companies and follows an investigation of suspected violations by Adani Group, including its flagship Adani Enterprises.
The investigation has drawn a blank so far, while the group has denied any wrongdoing. The regulator's probe has so far stumbled due to the stringent privacy laws of foreign jurisdictions.
"The additional disclosure requirements for foreign investors (offshore funds) has been in (the) making for one and a half years," said Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch.
"We want to make the rules of the game clear from the beginning no matter which jurisdictions the funds come from."
Offshore funds that have invested more than 50% of their assets under management in a single group of companies and more than 250 billion rupees ($3 billion) in Indian equity markets will have to disclose their investors, the SEBI said.
If the funds are unable to provide the details of all its investors then their registration with Indian markets will no longer be valid, said Ananth Narayan G., a whole-time SEBI board member.
These funds will also need to waive privacy rights granted to them by certain jurisdictions.
"This move is expected to further facilitate the larger interest of securities market to have a more diverse shareholding of publicly listed companies in India," said Yogesh Chande, Partner at Shardul Amarchand Mangaldas, Advocates and Solicitors.
"The concerns that there is considerable opacity in certain public shareholders of listed companies should also get addressed and perhaps make it more difficult for promoters to exert additional influence over listed companies via such public shareholders."
The regulator will exempt additional discloures by government-owned funds and related investors, sovereign wealth funds, pension funds and public retail funds, certain listed exchange traded funds, corporate entities and verified pooled investment vehicles that meet certain conditions.
It also halved the timeline for listing of initial public offerings. The revised timeline shall be made applicable in two phases and would be voluntary for all public issues opening on or after Sept. 1 and mandatory on or after Dec. 1.