India’s Securities and Exchange Board of India (SEBI) has announced key regulatory relaxations for foreign portfolio investors (FPIs), alternative investment funds (AIFs), and registered investment advisors (RIAs) as trading volumes in India’s cash equity market continue to rise.
The changes, approved in SEBI’s first board meeting under new Chairman Tuhin Kanta Pandey, include higher disclosure thresholds for FPIs, expanded investment options for AIFs, and greater flexibility for RIAs in fee collection. Alongside these reforms, SEBI has also committed to a comprehensive review of conflict-of-interest provisions for its members and officials, signaling greater transparency and governance measures.
Key Regulatory Reforms Announced by SEBI
One of the major policy shifts is the increase in the investment threshold for granular ownership disclosures by FPIs. Previously, FPIs holding ₹25,000 crore in Indian markets were required to disclose details of all entities holding ownership, economic interest, or control. This threshold has now been doubled to ₹50,000 crore, reducing compliance burdens for large foreign investors.
The decision is seen as a positive step for global investors, providing greater flexibility while retaining strict oversight for FPIs holding over 50% of their equity AUMs in India. However, Chairman Tuhin Kanta Pandey clarified that disclosure requirements remain unchanged for entities exceeding this 50% threshold.
In a major boost for Category II AIFs, SEBI has expanded their investment scope, now allowing a greater portion of assets to be allocated to listed debt securities with credit ratings of ‘A’ or below. This move aims to enhance liquidity in the corporate bond market and create more investment opportunities for institutional investors.
For Registered Investment Advisors (RIAs), SEBI has rolled back the three-month limit on advance fee collection, now allowing RIAs to collect up to one year’s fees in advance. This reversal of a previous restriction provides investment advisors with greater operational stability and financial flexibility.
Strengthening Governance with a High-Level Committee on Conflict of Interest
Beyond easing regulations, SEBI has also announced the formation of a high-level committee (HLC) to review conflict-of-interest provisions and disclosure requirements for its members and officials. The committee will consist of eminent professionals from statutory bodies, government, private sector, and academia.
The objective of this committee is to create a clear framework for governance, disclosure, and complaint resolution to enhance regulatory trust and accountability. Chairman Pandey emphasized the importance of building public confidence in SEBI’s regulatory approach, stating that the initiative will ensure greater transparency in market oversight and enforcement mechanisms.
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The Road Ahead: Impact on Market Participants
The latest regulatory changes reflect SEBI’s balanced approach—encouraging investment while strengthening regulatory oversight. By relaxing compliance requirements for FPIs, expanding AIF investment flexibility, and improving RIA fee structures, SEBI is aiming to boost market participation and institutional investment flows.
Additionally, the focus on governance and transparency through the HLC review will likely reinforce investor confidence and market integrity. As SEBI continues its efforts to align Indian market regulations with global best practices, these reforms mark a significant step toward a more investor-friendly and transparent financial ecosystem.
