SEBI decides to introduce framework for Accredited Investors, but is silent on bringing transparency on secret investors from Tax Havens and P-Note operations

Somnolent SEBI wakes up but is still sleepy on Tax haven investments and P-Notes

Somnolent SEBI wakes up but is still sleepy on Tax haven investments and P-Notes
Somnolent SEBI wakes up but is still sleepy on Tax haven investments and P-Notes

SEBI approves framework for accredited investors in India

Keeping the identity of multi-billion dollar investors through tax havens and doing nothing about the identity of Participatory Notes (P-Notes) holders, the Stock Exchange Board of India (SEBI) on Tuesday has come out with a framework for the creation of accredited investors, meant for medium-level players. According to news agency reports, SEBI decided to introduce a framework for accredited investors, a class of investors who may be considered as well-informed about investment products in the Indian securities market.

The board of SEBI after deliberation approved the proposal to introduce a framework for accredited investors. Under the proposed framework, individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body Corporates based on financial parameters would be eligible for accreditation of investors, SEBI said in a statement after the board meeting. The accreditation of investors should be carried out through “Accreditation Agencies” like subsidiaries of depositories and specified stock exchanges, and any other specified institutions.[1]

The question is why this Accredited Investor system is not covering P-Notes and Mauritius or Cayman-Islands-kind tax haven registered firms? None of these companies has declared to SEBI about the human faces behind these non-transparent firms where 30 or 40 shell firms have the same cubicle address in Mauritius!

The accredited investor concept may offer benefits to investors and financial product or service providers, such as flexibility in minimum investment amount, flexibility and relaxation in regulatory requirements and access to products/ services offered exclusively to accredited investors. Listing out the benefits linked to accreditation, SEBI said that accredited investors should have the flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.

AIF for accredited investors where each investor invests a minimum investment amount of Rs.70 crores may avail relaxation from regulatory requirements such as portfolio diversification norms, conditions for the launch of schemes and extension of tenure of the AIF. Accredited investors with a minimum investment of Rs.10 crore with a registered PMS provider, may avail relaxation from the regulatory requirement with respect to investment in unlisted securities and can enter into bilaterally negotiated agreements with the PMS provider.

Accredited investors who are clients of investment advisers will have the flexibility to determine the limits and modes of fees payable to the Investment Adviser through bilaterally negotiated contractual terms.

Why is P-Notes not being covered?

Here the question is why this Accredited Investor system is not covering P-Notes and Mauritius or Cayman-Islands-kind tax haven registered firms? None of these companies has declared to SEBI about the human faces behind these non-transparent firms where 30 or 40 shell firms have the same cubicle address in Mauritius! Recently PGurus reported that 3 shell firms from Mauritius which invested more than Rs.45,000 in the shares of Adani Group are sharing the same address in Mauritius[2].

India’s Stock Market is considered as the most non-transparent in operations, handled by certain operators. Mauritius based money routing was approved during the first NDA regime when Yashwant Sinha was the finance minister. His two sons and their daughters were later found with Mauritius linked companies. Then this crude money routing flourished when P Chidambaram became finance minister. Though Narendra Modi Government during the election campaign spoke against the prevention of black money, he has done nothing to control these huge money laundering operations through tax havens.

References:

[1] Sebi to introduce framework for a new class of investors in IndiaJun 29, 2021, ET

[2] All the three firms invested Rs.45,000 crores in Gautam Adani’s companies have the same address in Mauritius. Who are the owners of these three firms?Jun 15, 2021, PGurus.com

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