Supreme Court Denies Request for Enhanced Transparency in Investment Funds

Supreme Court's Ruling on Investment Fund Disclosure

New Delhi: On Thursday, the Supreme Court declined to mandate the Securities and Exchange Board of India (SEBI) to publicly disclose the ultimate beneficial owners and investment portfolios of alternative investment funds (AIFs) and foreign portfolio investors operating in India.

A panel comprising Justices BV Nagarathna, R Mahadevan, and DK Upadhyaya addressed a petition from TMC MP Mahua Moitra, stating that there is currently no legal framework for comprehensive public disclosure regarding ultimate beneficial owners.

The justices initially challenged Moitra on why she did not raise this issue in Parliament for discussion.

The court emphasized that it cannot issue directives without an established legal framework and subsequently dismissed the petition.

The court noted that if a legal framework existed and SEBI was not adhering to it, they could enforce compliance; however, in the absence of such a framework, they cannot issue directives.

Advocate Prashant Bhushan, representing Moitra, argued that the court could still instruct SEBI to disclose the actual beneficiaries of these funds, as unsuspecting investors are being exploited by those inflating company shares.

In her public interest litigation (PIL), Moitra has called for greater transparency and investor awareness in India's financial markets by requiring public disclosure of ultimate beneficial owners and the portfolio holdings of AIFs and foreign portfolio investors.

The plea highlighted that SEBI is responsible for regulating the securities markets in India and oversees the operations of AIFs and foreign portfolio investors.