SC Declines Mandating Full Public Disclosure for AIFs and FPIs

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Key takeaways

The Supreme Court declined to force SEBI into mandating public beneficiary lists for AIFs and FPIs due to a lack of legal backing.
Investments in AIFs grew rapidly to reach Rs 13 lakh crore in 2024, while total FPI assets surged past Rs 74 lakh crore in 2025.
Individual investors in an AIF must commit a minimum capital of Rs 1 crore, whereas internal employees can join with Rs 25 lakh under SEBI rules.
A foreign portfolio investor group cannot own 10% or more of an Indian company's equity without converting the holding into Foreign Direct Investment.

The Supreme Court of India recently refused to order SEBI to force Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs) to publicly reveal their ultimate beneficial owners.
The court highlighted that no specific legal framework currently requires such public disclosures, leaving the decision to lawmakers.

The petitioners argued that AIFs and FPIs use secret investment structures unlike public mutual funds, which follow strict rules under the SEBI Mutual Fund Regulations, 1996.
Because of these hidden ownership structures, these investment paths carry higher risks of market manipulation, money laundering, and tax evasion.
The court was informed that AIF Assets Under Management touched Rs 13 lakh crore in 2024, while registered FPI Assets Under Custody crossed Rs 74 lakh crore in 2025.
Defending existing rules, the Solicitor General explained that these funds already report sensitive details directly to SEBI rather than the general public.
The government cited the Vishal Tiwari vs Union of India case from January 2024, where the court ruled that constitutional judges have limited powers to interfere in SEBI's expert work.
Referring to Article 32, the court observed that complex financial policies should be debated in Parliament rather than decided through public interest lawsuits.

An AIF is a private pooled fund created in India to collect money from experienced investors using target strategies.
These funds follow strict rules laid out under the SEBI (Alternative Investment Funds) Regulations, 2012.
They invest money outside standard stock markets, targeting private equity, venture capital, start-ups, real estate, infrastructure, commodities, and private loans.
These vehicles suit High-Net-Worth Individuals, family offices, and large corporations ready for higher risks and longer waiting periods.
A standard investor must put in at least Rs 1 crore, though fund directors and key staff can invest starting at Rs 25 lakh.
Organizers can set up an AIF as a trust, company, Limited Liability Partnership, or corporate body.

Foreign portfolio rules govern foreign investors buying liquid local financial assets like shares and bonds for short-term profits without controlling company operations.
Under the NDI Rules, 2019, an foreign portfolio investor group cannot hold 10% or more of an Indian firm's total equity.
If an foreign investor crosses this 10% limit, it must sell extra shares quickly or reclassify the money as Foreign Direct Investment.
Foreign Institutional Investors form a specific institutional subgroup inside the broader foreign portfolio category, which also includes individual foreign investors.