Key Takeaways from SEBI Board Meeting: FPI Threshold Raised, Advance Fee Norms Revised

The Securities and Exchange Board of India (SEBI), in its 209th board meeting held in Mumbai on March 24, 2025, approved several critical regulatory measures aimed at strengthening governance, improving transparency, and facilitating ease of doing business across various segments of the capital market ecosystem. 

The decisions span across Foreign Portfolio Investors (FPIs), Alternative Investment Funds (AIFs), Market Infrastructure Institutions (MIIs), investment advisers, and research analysts.

Threshold for FPI Disclosures Raised to ₹50,000 Crore

To mitigate the risk of market disruption from large FPIs and ensure alignment with Press Note 3 stipulations, SEBI had earlier mandated comprehensive disclosures from FPIs holding over ₹25,000 crore in Indian equity assets. However, considering the significant growth in cash equity market volumes since FY 2022-23, the board has approved a revision in this threshold.

Going forward, FPIs with equity AUM exceeding ₹50,000 crore will be required to disclose full ownership and control details, up to the level of the natural person. The aim is to maintain market integrity while reflecting the evolving scale of the Indian markets.

There is no change in the additional disclosure requirement for FPIs with over 50% equity AUM invested in a single corporate group, which continues to ensure compliance with norms on Minimum Public Shareholding and Substantial Acquisition of Shares and Takeovers.

Category II AIF Investment Norms Relaxed

SEBI acknowledged the changing regulatory environment surrounding debt securities issuance. Previously, Category II AIFs were required to invest a majority of their capital in unlisted securities. However, with recent amendments to the SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, entities issuing listed debt can only raise fresh debt in listed form.

To accommodate this shift and promote investment in lesser-rated debt instruments, SEBI has decided that investments by Category II AIFs in listed debt securities rated ‘A’ or below will now be treated as investments in unlisted securities for regulatory compliance purposes. This move is expected to ease compliance challenges while supporting market liquidity.

Strengthening Governance in MIIs

To enhance the governance framework of Market Infrastructure Institutions (MIIs), SEBI approved a set of measures focused on appointments and transitions of key personnel:

• Public Interest Directors (PIDs): The current process requiring SEBI’s approval—but not shareholder approval—for appointing PIDs will remain unchanged. However, if a governing board opts not to reappoint a PID after their first term, the rationale must be documented and shared with SEBI.

• Cooling-off Period: SEBI will no longer prescribe a mandatory cooling-off period for PIDs moving between competing MIIs. However, individual MIIs may establish their own cooling-off rules for their directors and Key Management Personnel (KMPs).

• KMP Appointments: The authority for appointing or removing key roles such as Compliance Officer, Chief Risk Officer, Chief Technology Officer, and Chief Information Security Officer now shifts from the Nomination and Remuneration Committee to the Governing Board of the MII. This change aims to enhance accountability and align these roles more closely with the MII’s public interest mandate.

Advance Fee Norms for Investment Advisers and Research Analysts Revised

Recognising concerns raised by the investment advisory and research community regarding fee restrictions, SEBI has revised its advance fee collection norms.

Investment Advisers (IAs) and Research Analysts (RAs) can now charge advance fees for up to 1 year—an increase from the earlier limits of 6 months and 3 months, respectively. 

However, this relaxation applies only to individual and Hindu Undivided Family (HUF) clients, excluding accredited investors and institutions, who will continue to operate under bespoke contractual terms.

This move is intended to offer greater flexibility to advisers while ensuring protection for retail investors through clearly defined payment and refund norms.

Deferment of Amendments for Certain Intermediaries

The board has decided to defer the implementation of previously approved amendments to regulations governing Merchant Bankers, Debenture Trustees, and Custodians. These amendments, which required the hiving-off of regulated activities into separate legal entities, will be reviewed further. A revised proposal will be brought forward after internal evaluation to ensure a level playing field while avoiding unnecessary structural complications.

High-Level Committee on Conflict of Interest and Disclosures

In a significant step towards enhancing transparency and accountability, SEBI will constitute a High-Level Committee (HLC) to review the existing framework governing conflict of interest, disclosures of property, investments, and liabilities among SEBI board members and officials.

Comprising distinguished individuals from regulatory bodies, government, private sector, and academia, the HLC will be tasked with recommending improvements to uphold the highest standards of ethical conduct. The committee is expected to submit its findings within three months for board consideration.

Conclusion

The latest set of reforms approved by SEBI reflect its proactive stance in adapting to a growing and evolving market landscape. These measures aim to bolster investor confidence, ensure regulatory clarity, and promote ethical market practices. While some reforms offer ease of business for market participants, others reaffirm SEBI’s commitment to governance and transparency at the core of India’s financial ecosystem.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.