SECURITIES Exchange Board of India (SEBI), on Monday, has asked several custodian banks to provide details of owners of offshore bank accounts and Foreign Portfolio Investors (FPI), according to sources quoted by news agency Reuters. This comes in the wake of the Hindenburg Research on Adani Group companies, that revealed alleged misuse of tax havens and stock manipulation by the conglomerate.
Custodian banks are typically foreign banks that manage the cash flows of FPIs. Last week, the Indian market regulator had asked such banks to gather details of offshore accounts from these investors by March and share the collected information with it by the end of September.
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“The regulator has sought details of the ultimate beneficial owners specifically in cases where the senior management official or fund manager has been listed as the beneficial owner,” one of the sources quoted by Reuters said.
SEBI would ask banks to liquidate the holdings of investors by March 2024 and would consider their investments ineligible if the custodian banks are unable to provide the details of these beneficial owners. The practice of many funds to cite “senior management official” or the fund manager as the beneficial owner of offshore accounts prevents the regulator from clearly determining who the ultimate owner of the account is.
However, the regulator has ways to get such crucial details.
“One of the key conditions for a foreign portfolio license is that investors need to share beneficial owner details whenever asked for it,” one of the sources said. Such demand by SEBI to get these details is not unprecedented but assumes importance after the market rout of Adani Group companies’ stocks.
Even though the oil-to-cement conglomerate has denied all allegations levelled against it by the US-based short-seller Hindenburg, these were enough to spook shareholders who have dumped the group’s stocks. Firms have of the Adani Group have collectively lost more than $100 billion since January 24 when the research was released.
Foreign investors have so far pulled out their investments worth $288.52 billion from Indian equities (shares of companies). Currently, there are 11,000 foreign funds registered with the SEBI.
(With Reuters inputs)
