The Enforcement Directorate (ED) is currently investigating high-net-worth individuals (HNIs) for their offshore investments in funds that focus on Indian equities.
The investigation is based on concerns that these investors may have violated foreign exchange and securities regulations by bypassing the Securities and Exchange Board of India (SEBI)-registered Foreign Portfolio Investors (FPIs).
Investors have used offshore vehicles to invest in the Indian stock market, which could be seen as a way to avoid Indian laws.
Although the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) allows Indian residents to invest abroad, it explicitly prohibits investments in instruments issued by Indian entities.
Legal experts have warned that such actions may go against the LRS rules, raising concerns about potential violations of the Foreign Exchange Management Act (FEMA).