Position Limits of FPIs in Currency...
The investment by an investor in the assets of a foreign nation, such as stocks and bonds liste...
The Foreign Portfolios Investors (FPI) willing to invest in India’s financial assets are required to register with the Designated Depository Participant. In order to access the eligibility requirements of Foreign Portfolio Investors, the Designated Depository participant is required to examine the applicant’s documents. Henceforth, this process of examining the documents of the FPI applicant is termed as Know Your Clients (KYC) under the Master Circular for Foreign portfolio Investors, Designated Depository Participants and Eligible Foreign Investors. Under the said circular, the FPI is required to provide KYC documents to the DDP, which upon completion, will be uploaded on the KYC Registration Agencies (KRA) portal for other market intermediates to access and complete their KYC requirements. The present article will discuss the requirement for KYC as per the said circular:
The first KYC requirement for FPI is the documentation requirements. The FPI shall produce the following documents:
|Document Type||KYC Documentation Details||Category-I||Category-II|
|Applicant Level||MoA, Certificate of Incorporation, Prospectus Etc. Address Proof PAN Board Resolution FATCA or CRS Form Form or KYC Form||Required except Board resolution||Required|
|Authorised Signatories||Signatures List||Required||Required|
|Ultimate Beneficial Owner||List of Ultimate Beneficial Owners, including the details of intermediate BO Identity Proof||Required except identity Proof||Required|
The other valid documents for KYC requirements are:
1. Undertaking: An undertaking from FPI that, upon demand from regulators or law enforcement agencies, the relevant documents will be submitted to the intermediary.
2. FPI Category-I from High-Risk Jurisdiction: The KYC documentation applied to FPI Category-II will be required from FPI category-I coming from a high-risk jurisdiction.
3. Prospectus and Information Memorandum: In lieu of an official contribution document, the prospectus and information memorandum can be used for KYC.
4. Valid FATCA or CRS Documentation: For the purpose of account opening, valid FATCA (Foreign Account Tax Compliance) or CRS (Common Reporting Standard) of OECD documents can be used for KYC.
5. E-PAN: The E-PAN issued by the Central Board of Direct Taxes can be produced by FPI for KYC purposes without the need for any certifications.
The other conditions for KYC documentation are:
The following conditions are to be fulfilled for KYC requirements for the opening of a bank account:
The FPI can appoint only one custodian if a FPI holds a separate depository account in NSDL and CDSL.
The following are the provisions for the Identification and Verification of beneficial owners:
The periodical reviews of KYC requirements mean ensuring that the documents, information or data collected are kept up to date by undertaking reviews of existing records on a periodical basis. While reviewing the KYC documents, the DDP may seek confirmation from FPI in regard to the change of information supplied earlier. Further, if there is a change in the information, the FPI should provide the following documents to the custodian.
|Jurisdiction||FPI Category-I||FPI Category-II|
|High Risk||FPI registers under Regulation 5(a) (i): The period shall be every 3 years during the continuance of registration. Others: Annually||Annually|
|Non-High Risk||The period shall be every 3 years during the continuance of registration||Regulated entities: Every 3 years during the continuance of registration. Others: Annually|
Another KYC requirement is maintaining the obtained records securely. The information may be provided to the intermediaries only on a “Need to know basis” basis. It should be provided using an authentication method wherein the intermediary can access the information from KRA using authentication such as OTP. In this regard, the KRA shall need to maintain the E-mail Ids of the Foreign Portfolio Investors.
The custodian must maintain the KYC records in original for a minimum period of 5 years from the date the transaction with the FPI is ended. Further in case if there is pending litigation, in that case, the information shall be maintained till such time the proceedings are completed.
The other guidelines for KYC requirements are:
The supporting documents for KYC requirements are:
1. Identity Proof: Identity card or documents bearing the applicant’s photo, such as a Driving License or passport etc., issued by the central or state government, statutory or Regulatory authorities and tax authorities.
2. Address Proof: the list of documents includes:
The KYC requirements help the DDP to conduct the due diligence process in an orderly manner. It helps in determining the eligibility criteria for registration. The custodian shall scrutinise the documents provided by the FPI at the time of registration as a process of due diligence. It helps in ascertaining the identifying the FPI and helps in locating them. The KYC requirements act as a measure to protect the interests of the investors and maintain a database of the total FPIs. Henceforth, the DDP shall meet the KYC requirements as discussed above before registering the FPI.
Read Our Article: Central KYC Registry: A Concept Study