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Below the Comment on SEBI proposal for additional disclosure for FPIs and other key decisions by Ajay Garg, CEO, SMC Global Securities

SEBI has approved the proposal for FPI's additional disclosure limit for those holding equity AUM of more than Rs.50,000 crores, from the previous limit of Rs.25,000 crores. This decision was taken because of the doubling of trading volumes in the cash equity market between FY23 and FY25. These large-sized FPIs have to disclose details about their ownership or economic interest in all entities as they hold the power to disrupt the market. This step can reduce the chances of avoiding the disclosure requirements by large-sized FPIs and promote the orderly functioning of the market.

Category II AIFs are required to majorly invest in unlisted securities and SEBI has recently changed the rules due to which there can be a reduction in the availability of unlisted debt securities in the market. To ensure that these AIFs meet their minimum investment requirement of unlisted securities, it is proposed that the investment made in listed debt securities rated “A” or below will be considered unlisted. This ensures that the category II AIFs will work smoothly despite the reduction of unlisted debt securities in the market and the large investors will keep up with their interest in these funds.

In the context of the advance fee structure of research analysts and investment advisors, they can charge advance fees for up to 1 year with the consent of the client. This can promote smooth advisory services for clients related to long-term investments and wealth management.

SEBI will create a high-level committee to review the conflicts of interest and investment disclosures related to the Board’s members and officials. This committee will review and make recommendations to improve the current disclosures framework and ensure transparency. 

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