Big Reforms On The Table: SEBI To Discuss Simplified Rules For FPIs, Co-Investments In AIFs

Markets watchdog Sebi's board is likely to discuss a series of regulatory reforms during its upcoming meeting on Wednesday.

Several of these proposals have already been floated for public consultation, indicating a broader push towards refining the regulatory landscape.

This would mark the second board meeting under the chairmanship of Tuhin Kanta Pandey, who assumed office on March 1.

One of the key agenda items is the simplification of rules and regulatory compliance for Foreign Portfolio Investors (FPIs) investing exclusively in Indian Government Bonds (IGBs) through the Voluntary Retention Route (VRR) and the Fully Accessible Route (FAR). This move is aimed at attracting more long-term bond investors to the Indian market, people aware of the development said.

Currently, foreign investors can invest in Indian debt through three routes-- General, VRR, and FAR. The VRR and FAR routes are comparatively liberal, as they allow investments without many of the restrictions, such as security-wise or concentration limits that apply under the General route.

To further streamline this, Sebi proposed creating a new FPI category, IGB-FPIs, focused solely on government bond investments, according to the consultation paper issued last month.

Under this, the regulator recommended easing registration and other compliance requirements for these entities.

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Notably, Sebi suggested that IGB-FPIs should be exempt from disclosing investor group details, since bond investments under VRR and FAR are not subject to such caps.

Typically, FPIs are required to disclose their group structures for monitoring investment limits, but this requirement may no longer apply to IGB-focused investors.

In addition, the board may discuss a proposal to rationalise the content of the placement document of Qualified Institutions Placement (QIP) by prescribing only the relevant information regarding the issue, people aware of the development said.

Presently, in QIPs, the issuer is required to disclose the details in the placement document as prescribed under the ICDR (Issue of Capital and Disclosure Requirements) norms.

The board of Sebi may review a proposal on providing flexibility to alternative investment funds to offer co-investment opportunities to investors within the AIF structure, they added.

Co-investment, in AIF industry parlance, refers to the offering of the investment opportunity to the investors for additional investment in unlisted securities of an investee company, where an AIF is also making or has made the investment. 

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