Sagus Speaks Newsletter – March 2024 (Part II)

Sagus Legal


Sagus Legal
The depositories and custodians shall be responsible for tracking the utilisation of the above-mentioned 3% limit for the apex companies at the end of each day.
India Government, Public Sector
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This Newsletter covers key Regulatory & Policy Updates, Government Notifications and Judicial Pronouncements.


SEBI grants relaxations to certain FPIs from additional disclosure requirements1.

Securities Exchange Board of India ("SEBI") through its circular dated 20.03.2024 ("FPI Amendment Circular") has made certain amendments to Circular No. SEBI/HO/AFD/-PoD-2/CIR/P/2023/148 dated 24.08.2023 ("FPI Circular"). The FPI Circular mandated certain additional disclosures for Foreign Portfolio Investors ("FPIs") that qualified the objective criteria listed thereunder. This FPI Amendment Circular has come into effect from 20.03.2024.

SEBI through the FPI Amendment Circular, has decided that in addition to the FPI's exempted under Para 8 of the FPI Circular from making additional disclosures as required under Para 7 of the FPI Circular, an FPI having more than 50% of its Indian equity AUM (assets under management) in a corporate group shall not be required to make additional disclosures as provided under Para 7 of the FPI Circular, subject to compliances with the conditions provided below:

  1. The apex company of such a corporate group has no identified promoter. For this purpose, the depositories shall make the list of corporate groups based on the corporate repository published by the stock exchanges and their respective apex companies having no identified promoters public.
  2. Such FPI holds not more than 50% of its Indian equity AUM in the corporate group, after disregarding its holding in the apex company with no identified promoter.
  3. The composite holding of all such FPIs (that meet the above-mentioned 50% concentration exemption criteria excluding the FPIs that are either exempted or have been disclosed) in the apex company is less than 3% of the total equity share capital of the apex company.
  4. The depositories and custodians shall be responsible for tracking the utilisation of the above-mentioned 3% limit for the apex companies at the end of each day. Upon breach of the said limit, the depositories shall be required to make the information public before the start of trading the next day.

Consequently, any prospective investments in the apex company by the FPIs (that meet the above-mentioned 50% concentration criteria in the corporate group) shall be required to either re-align their investments below the 50% threshold within 10 trading days or make the relevant additional disclosures as required under the FPI Circular, provided further that no such requirement for additional disclosures shall be applicable to FPIs unless the 3% cumulative limit for the apex company continues to be met through the said period of 10 trading days.

RBI issues an omnibus framework for recognizing SROs for Res2.

The Reserve Bank of India ("RBI") on 21.03.2024 issued an omnibus framework for recognising the Self-Regulatory Organisations ("SROs") for the Regulated Entities ("REs") of RBI ("SRO Framework").

The overview of the SRO Framework broadly is as follows:

  1. Characteristics: SROs are expected to operate with credibility, objectivity and responsibility under the oversight of the regulators to improve regulatory compliance for healthy and sustainable development of the relevant sector said SROs are catering to. SROs should have derived sufficient authority from their membership agreements to set ethical, professional and governance standards and to enforce these standards on its members (i.e. REs that accept the membership of the SROs) and develop standards for improving compliances and adherence by members to the rules and regulations framed by RBI.
  2. Objectives of SRO: SROs are expected to adhere to a set of overarching objectives for the betterment of the sector they represent, foster advancement and address critical industry concerns within the broader financial system for steering the sector towards professionalism, compliance, innovation and ethical conduct. Further, they shall act as the collective voice of their members while engaging with RBI, government authorities or other regulatory and statutory bodies. SROs shall be required to share relevant sector-specific information to the RBI to aid in policymaking.
  3. Responsibilities of the SROs: The primary responsibility of the SROs towards its members shall be to promote best business practices. SROs shall aim to protect the interests of the customers/ depositors in the best interests of their members.
  4. Eligibility criteria: The entities intending to function as an SRO should fulfil the eligibility criteria including but not limited to the following in order to ensure the independence and integrity of the SROs and to ensure that the SRO delivers on its objectives and responsibilities: (a) applicant should be set up as not-for-profit companies registered under Section 8 of the Companies Act, 2013; (b) applicant must have the adequate net worth to fulfil responsibilities of SRO; (c) applicant shall have the specified membership or shall have the roadmap for attaining the specified membership and (d) applicant shall have sufficiently diversified shareholding with no entity holding more than 10% of its paid-up share capital, either singly or acting in concert. Further, the applicants should have directors having the relevant professional competence and a reputation of fairness and integrity to be established to the satisfaction of the RBI.
  5. Governance: SROs shall operate with transparency, professionalism, confidence and in compliance with the highest standards of governance. Accordingly, SROs are required to be professionally managed and suitable provisions in their articles of association / bye-laws should be incorporated to ensure this. The directors of the SRO should fulfil the 'fit and proper' criteria as framed by the board of the SRO on an ongoing basis and have relevant expertise/ experience and should be persons of the highest integrity.

To view the full article please click here.


1 SEBI FPI Amendment Circular 20.03.2024.

2 RBI SRO Framework 21.03.2024.

3 RBI AIF Amendment Notification 27.03.2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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