New Delhi: The Supreme Court on Tuesday refused to entertain a PIL by TMC MP Mahua Moitra seeking transparency and investor awareness in India's financial markets by mandating public disclosure of ultimate beneficial owners (UBO) details as well as portfolio holdings of alternative investment funds (AIFs) and foreign portfolio investors (FPIs).
A bench of Justices B V Nagarathna and Satish Chandra Sharma asked the petitioner led by advocate Prashant Bhushan to make a representation with the authorities concerned.
The counsel agreed for it but asked the court to keep the matter pending.
The bench, however, disposed of the matter, giving a liberty to make a representation, which would be considered in accordance with the law.
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The petitioner claimed the rapid expansion of AIFs and FPIs in India's financial markets has given rise to serious transparency concerns.
"Unlike Mutual Funds, which are subject to stringent public disclosure norms, AIFs and FPIs operate under opaque structures, raising risks of market manipulation, money laundering, and tax evasion," her plea said.
It pointed out the Securities and Exchange Board of India (SEBI), a statutory body, regulated the securities markets in India. As part of its mandate, SEBI oversees the operations of Alternative Investment Funds (AIF) and Foreign Portfolio Investors (FPI) in India. SEBI (Alternative Investment Funds) Regulations, 2012 and SEBI (Foreign Portfolio Investors) Regulations, 2019 have been enacted for the regulation of AIF's and FPI's in India.
Supreme Court refuses to entertain plea against Allahabad HC order on Sambhal mosque whitewashingThe plea claimed the lack of full public disclosure of UBOs hampers the ability of honest market participants and especially the retail investors to conduct their business freely and fairly and is therefore a violation of Article 19(1)(g) of the Constitution of India.
"The opacity in AIF and FPI structures allows certain entities to manipulate the market and unfairly benefit at the expense of others, undermining the integrity of the capital markets and affecting the right to carry on business freely," it said.
The plea said the public sector undertakings and state owned companies are also participants in India's capital markets which comprises taxpayers money.
"Any volatility in the capital markets because of foreign forces or such entities would lead to undermining the integrity of the entire financial system. The lack of transparency and oversight in the operation of AIFs and FPIs threatens the integrity of the financial markets, which can further have a cascading effect on public welfare, investments, and the economy," it contended.
The plea stated any non-disclosure of ultimate beneficial owners of these funds leaves India's capital markets and financial system vulnerable to foreign interference, money laundering and tax evasion. It is equally detrimental to investor confidence and economic welfare of the nation. Opaque financial structures have the ability to harm national economic interests.
The larger public interest in having transparent financial markets far outweighs the privacy interests of AIFs and FPIs, it added.