Overseas investors coming through the Securities and Exchange Board of India's (Sebi) newly-created FPI route would need to disclose their direct and indirect interest in any securities about which they make public any investment advice.
While ushering in easier entry norms and operational framework for the overseas entities seeking to invest in Indian capital markets, the proposed regulations for Foreign Portfolio Investors (FPIs) also provide for strong checks and balances against any market manipulation or fraudulent activities.
The new regulations, which were approved by Sebi's board over weekend and would be notified soon, also contain a detailed 'Code of Conduct' for the FPIs, a newly created category of overseas investors that would encompass existing classes like FIIs and QFIs.
Besides, it has clearly spelt out the norms to be followed by the FPIs and their employees while rendering any investment advice through publicly accessible media.
The FPIs and their employees would not be allowed to render "directly or indirectly any investment advice about any security in the publicly accessible media, whether real time or non real-time, unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice".
Besides, the employee of an FPI would need to disclose the interest of his dependent family members and his employer, while rendering such advice.
The proposed Code of Conduct for FPIs also require them to ensure clear segregation of their own money and securities from its clients' funds and assets, and also to maintain "arms length relationship between its business of fund management/ investment and its other businesses".
The FPIs would also need to ensure that they do not engage in fraudulent and manipulative transactions in any securities.
Besides, an FPI or any of its directors or managers should not indulge in any insider trading, either through its own account or through any associate, family members, relatives or friends.
The FPIs would need to give an undertaking that they would not be party or instrumental in "creation of false market in securities listed or proposed to be listed in any stock exchange", price rigging or manipulation of prices, or passing of price sensitive information to any person or intermediary in the securities market.
The FPI would also need to ensure that "good corporate policies and corporate governance are observed by it", while maintaining confidentiality in respect to trades done on its own behalf and/or for its clients.