Transparency, Privacy And Proportionality: Rethinking Beneficial Ownership Disclosure Requirements For Foreign Portfolio Investors In India
Sanjana Mehta, NMIMS Kirit P. Mehta School of Law
ABSTRACT
With their contributions of foreign capital, liquidity, and international engagement, Foreign Portfolio Investors (FPIs) play a significant role in India's securities market. Simultaneously, as cross-border investment arrangements become more complicated, it becomes more difficult to identify the people who ultimately own, control, or profit from investments made through FPIs. As a result, beneficial ownership disclosure has grown in importance within India's securities regulations.
In 2023, the Securities and Exchange Board of India ("SEBI") implemented an extra disclosure framework for some FPIs, mainly in reaction to worries about potential evasion of takeover laws, Minimum Public Shareholding requirements, and limitations on investments from land-bordering nations.1 Extensive disclosure requirements may result in substantial compliance and confidentiality difficulties, especially for big investment funds with distributed ownership, even while such information fosters transparency and market integrity.
This study looks at how well India's FPI beneficial ownership disclosure regime strikes a balance between proportionality, privacy, and transparency. It examines how SEBI's disclosure framework changed between 2023 and 2026 and applies the constitutional concepts of proportionality and privacy to the regulatory issue. Additionally, it takes into account recent empirical evidence that suggests ownership-transparency rules may impede some lawful cross-border investment without necessarily discouraging potentially illegal actors.
In light of the regulatory risk that a specific FPI presents, the article contends that the primary regulatory concern should not be whether or not FPIs must disclose information, but rather how much information must be provided. It suggests a risk-calibrated paradigm in which high-risk FPIs continue to be subject to thorough look-through disclosure, medium-risk FPIs are subject to enhanced disclosure, and low-risk FPIs are subject to regular disclosure obligations. The article also makes a distinction between public and regulatory openness, contending that information required for SEBI's oversight duties shouldn't always be freely disclosed to the public.
