On Friday, the Securities & Exchange Board of India (Sebi) circulated a list of eight entities, mostly based in Mauritius, with the custodians which are banks and non-banks acting as bookkeepers of FPIs trading on Indian stock exchanges.
The customers were told to check whether any of the entities mentioned in the Sebi list are either ‘investment manager’ or ‘fund accountant’ or ‘portfolio manager’ of the FPI clients of the customers. The customers have to share with Sebi the details of All the FPIs connected to these eight entities by Monday.
“Probably, Sebi is trying to find out the extent to which these entities in question are present in the market… Over how many funds they control and finally which are the stocks they have traded,” a person aware of the email told ET .
One investment manager or portfolio manager can be connected to multiple FPIs registered with Sebi.
In the past, Sebi had often run into a wall trying to identify the ‘beneficial owners’ (BO) – or the last natural persons who call the shots in an FPI. However, if the regulator or custodian is unable to spot a FPI’s ultimate BO, then the key person in the investment manager entity of the fund is considered as BO. Sebi, in the email, has not mentioned any Indian companies or stocks that are under scrutiny. “A few of entities named in the list have figured in recent media reports, some are large service providers, and some the regulator may have obtained from market intelligence. It looks like Sebi has deliberately mixed the suspicious names with names of some of the well-known service providers in Mauritius,” a person aware of the email told ET. A portfolio manager typically takes key decisions like which stocks to buy and sell, when to invest and exit. Investment manager is a corporate entity which hires the portfolio manager. If there is no single individual with a large share in the f und corpus, then the director or the chief manager of the investment management entity may be considered as the brain behind an FPI. Fund accountants, serving as fund administrators offer fund accounting, investor onboarding, and regulator and investor reporting services. More sophisticated service providers offer their fund manager clients plug-and-play solutions on a multi-jurisdictional basis.
Depending on the nature of services being provided, these are typically regulated by the securities market regulator in their country of operation. Given their central role in asset allocation structures, a regulator may be able to gather information on gaps in compliances in their client accounts.
“We are not sure what can be deduced from all this information. But since questions have been raised in the Parliament, we understand that the regulator has to look at all possibilities. Sebi has not indicated the purpose behind the collection of this information. So , we don’t know whether it is also probing the recent bout of short-selling,” said a banker.
A week ago, Sebi had asked custodians to share BOs of FPIs and sub-funds as on the close of the fiscal.
Sebi officials did not comment on the matter.