General Newsletter – January 2026

CAPITAL MARKET

SEBI CONSULTATION PAPER ON THE CONSOLIDATION OF FPI/DDP MASTER CIRCULAR (5 DECEMBER 2025)

On 5 December 2025, SEBI released a consultation paper proposing a comprehensive consolidation and modernisation of the Master Circular governing Foreign Portfolio Investors (FPIs), Designated Depository Participants (DDPs) and Eligible Foreign Investors. Since the existing Master Circular dated 30 May 2024, SEBI has issued multiple circulars addressing granular beneficial-ownership disclosures, relaxations for government-securities-focused FPIs, and the introduction of the SWAGAT-FI (Single Window Automatic & Generalised Access for Trusted Foreign Investors) framework. The proposed consolidated Master Circular seeks to fold all these updates into a single, coherent, practitioner-friendly document, retire fragmented prior guidance, and formally embed SWAGAT-FI within the primary rulebook.

Key Proposals

• Clarified and Consolidated Granular Beneficial Ownership Disclosure: Foreign Portfolio Investors (FPIs) and Offshore Derivative Instrument (ODI) subscribers meeting a ₹50,000 crore equity Assets Under Management (AUM) threshold (raised from ₹25,000 crore in April 2025) or a 50% concentration criterion must provide full look-through disclosures of Ultimate Beneficial Ownership (UBO) to the level of natural persons, without exemption thresholds. The consolidated framework will clearly articulate trigger definitions, narrow exemptions to Government FPIs and Public Retail Funds only, and formalise grouping rules whereby related FPIs/ODI subscribers with common ownership are monitored on a consolidated basis for investment-cap compliance.
• ODI Restrictions Formalised: The December 2024 restrictions banning derivative-linked ODIs and limiting ODI hedging to identical underlying securities (not derivatives) will be formally consolidated. ODI issuers cannot hedge using derivatives on Indian exchanges, and separate FPI registrations are mandated where the same entity issues both direct securities and ODIs. This closes arbitrage structures and aligns with Press Note 3 concerns around opaque foreign leverage.
• Simplified Onboarding: A consolidated Common Application Form (CAF) will capture all eligibility, KYC and beneficial-ownership requirements in a single digital submission. Legal Entity Identifier (LEI) use is mandated for identified entity types. Material-change reporting is now clearly categorised into Type I (governance/control, 7 working days) and Type II (administrative, 30 days).

Implications

The consolidation is a major regulatory-rationalisation initiative, not a shift in FPI policy. Its material elements such as formalisation of SWAGAT-FI (easing entry for trusted investors), tightening and clarification of granular-disclosure and ODI-restriction frameworks, and consolidation of fragmented guidance are designed to attract certain mid-tier global asset managers while raising compliance costs for large FPIs. Large players will face elevated ongoing beneficial-owner disclosure burdens and custodians will need enhanced systems for Legal Entity Identifier (LEI), grouping logic and consolidated position monitoring. Indian issuers benefit from more predictable foreign-investor oversight and clearer concentration thresholds.

SEBI 212TH BOARD MEETING: COMPREHENSIVE REGULATORY REFORMS (17 DECEMBER 2025)

SEBI's 212th Board Meeting held on 17 December 2025 approved a series of far-reaching regulatory reforms spanning stock brokers, mutual funds, Initial Public Offerings (IPOs), debt markets, credit rating agencies, and corporate governance. The reforms aim to simplify compliance, enhance investor protection, and improve ease of doing business across India's capital markets. Key capital-markets implications are as follows:

• ICDR Amendments – IPO Simplification & Lock-In Automation
  
  SEBI approved targeted amendments to the ICDR Regulations, 2018, addressing two critical IPO-execution gaps:
  • Pledged Non-Promoter Share Lock-in: Where preIPO non-promoter shareholding is already pledged and depositories cannot technically create a lock-in, depositories will now mark such shares as "nontransferable" for the prescribed six-month lock-in period. Upon invocation or release of the pledge, the depository's system will automatically enforce lock-in for the balance period, removing manual tracking friction and execution risk.
  • Abridged Prospectus at DRHP Stage: A focused, standardised abridged prospectus will now be made available at the Draft Red Herring Prospectus (DRHP) stage, bringing key information to retail investors at the nascent stage. SEBI approved rationalised disclosures within the prospectus and may dispense with separate "offer document summary" requirements pending Central Government consultation. This simplifies disclosure architecture and improves retail access.
• LODR Amendments – Investor Services & Unclaimed Amounts
  
  SEBI approved significant simplifications to investorservice timelines:
  • Removal of Letters of Confirmation (LOC): For investor service requests such as issuance of duplicate certificates, transmission, and dematerialisation from suspense accounts, direct credit of securities to demat accounts is now permitted after due diligence, eliminating the LOC requirement. This reduces procedural timelines from ~150 days to ~30 days and lowers operational risk for Registrar and Transfer Agents (RTAs) and listed entities.
  • Reintroduction Window for Old Physical Transfer Deeds: A special window has been created for relodgement of physical transfer deeds executed before 1 April 2019, restituting property rights for long-standing investors and reducing litigation risk.
  • Unclaimed Amounts Transfer to Investor Education and Protection Fund (IEPF): Issuers of non-convertible securities with unclaimed interest, dividends, or redemption amounts will now transfer such amounts to IEPF after 7 years from maturity, instead of multiple interim transfers. This reduces administrative burden and simplifies investor claim processes.
• High Value Deal Listed Entity (HVDLE) Threshold Raised & Governance Harmonised
  
  SEBI approved a structural overhaul of High Value Debt Listed Entity (HVDLE) compliance:
  • Threshold Increase: The HVDLE identification threshold has been raised from ₹1,000 crore to ₹5,000 crore of outstanding non-convertible debt. This compliance relief applies to mid-sized NonBanking Financial Companies (NBFCs), Housing Finance Companies (HFCs), Asset Reconstruction Companies (ARCs), Real Estate Investment Trusts (REITs), and insurance companies, encouraging listed debt issuance without governance overburden.
  • Governance Alignment with Equity-Listed Entities: HVDLE corporate-governance norms have been extensively harmonised with LODR provisions for equity-listed companies, including materialsubsidiary tests using "turnover", independent director composition, audit-committee mandates, and related-party transaction frameworks. This reduces interpretational gaps and provides debt investors with equity-style governance discipline.
  • Secretarial Audit Framework Formalised: HVDLEs must now appoint secretarial auditors for five-year terms, bringing debt-listed entities in line with equity-listed standards and enhancing audit oversight of debt-issuer compliance.
• Debt Market Incentives for Retail Investors
  
  SEBI approved amendments allowing issuers of listed non-convertible securities to offer additional interest or discounts to retail investors, senior citizens, employees, and other notified categories at primary issuance (not secondary transfers). This is designed to deepen retail participation in the corporate bond market and expand the investor base in the debt segment, making listed bonds more competitive vis-à-vis bank deposits and small savings instruments.
• Stock Brokers Regulations Replacement & Brokerage Rationalisation
  
  SEBI approved replacement of the three-decade-old Stock Brokers Regulations, 1992, with the Stock Brokers Regulations, 2025, reorganising the framework into 11 clear chapters, removing obsolete provisions. Stock exchanges become first-line regulators for compliance reporting by brokers.
• Mutual Funds Regulations 2026 – Comprehensive Overhaul
  
  
  SEBI approved a comprehensive rewrite of the Mutual Funds Regulations, 1996, resulting in the new SEBI (Mutual Funds) Regulations, 2026, shortening the existing regulation length by 46% and simplifying compliance.
  • Base Expense Ratio (BER) Framework: Expense limits now exclude statutory levies (Securities Transaction Tax, GST, stamp duty, SEBI/exchange fees), which are charged on actuals over and above permissible brokerage. This improves transparency by distinguishing fund management costs from statutory charges.
  • Unified Eligibility & Role Clarity: Simplified criteria for mutual fund sponsors and Asset Management Companies (AMCs), with clear demarcation between AMC and trustee roles, reduce operational ambiguity and ease compliance.
  • Distributor Incentive Model: SEBI has approved a revised incentive framework rewarding distributors for onboarding new-to-industry investors from B-30 cities and women investors (effective 1 February 2026), shifting flows towards regulated market products while reducing misuse of prior incentive models.

Key Takeaways

These reforms signal SEBI's continued push toward principlebased, transparent regulation balancing ease of doing business with investor protection. For issuers and IPO-bound entities, pledged-share automation and DRHP prospectuses streamline capital raising; and material-subsidiary and governance updates require policy reviews. For debt issuers, the HVDLE threshold increase and debt-market incentives lower compliance burden and broaden the bond-investor base. For intermediaries, stock-brokers and mutual-fund regulation replacements require systems upgrades and governance reviews. For investors, faster demat credit, simplified unclaimed-amount processes, and rationalised expense ratios improve experience and cost-efficiency.

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