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To keep up with the changing environment and needs of the securities market, the Securities Exchange Board of India (SEBI) frames rules from time to time in the form of Rules, Regulations, Circulars, Notifications, etc. Under section 11 (1) of the Securities Exchange Board of India Act, 1992, SEBI is empowered to frame rules. In a recent exercise of the power under section 11, SEBI has recently issued Circular No. SEBI/HO/AFD/P/CIR/2023/043 dated 27th March, 2023 streamlining the on boarding process of Foreign Portfolio Investors (FPIs). The circular came into effect on the date it was notified. This circular modifies the “Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors” issued on 19th December 2022 vide SEBI Circular No. SEBI/HO/AFD-2/CIR/P/2022/175. The circular not just introduces changes but also aligns the provisions to the Master Circular on SEBI (Foreign Portfolio Investor) (Amendment) Regulations, 2023 issued on 20th March 2023. The circular at hand aims to ease the on boarding process of FPIs and on reducing the time taken for granting registration and opening demat, trading and bank accounts of FPIs. Under this circular, SEBI allows uploading scanned copies of the documents for grant of FPI registration, use of digital signatures and certified copies of original documents, etc. Let’s understand the intricacies of this circular regarding streamlining the on boarding process of FPIs in detail.
This circular allows the FPIs to use digital signatures for the execution of CAF and other documents relating to registration. Subject to a condition that the digital signatures should be as per the provisions of the Information Technology Act, 2000.
Where a PAN application by an FPI applicant is made through the CAF portal, the DDP or Custodian verifies the PAN on the basis of its availability on the CAF module on the website of the depositories. On the website, PAN is reflected through an automated secure feed from the Income Tax Department.
In addition to the above changes, SEBI has also changed the timelines given under the master circular. The term “as soon as possible but not later than seven working days” has been inserted in place of “forthwith” in the following case:
In the following cases, the term “as soon as possible but not later than two working days” has been inserted in place of “forthwith”:
In conclusion, it can be said that SEBI has made an attempt to simplify the procedural requirements of the on boarding process of FPIs. These changes in the on boarding process of FPIs are a welcome step. It mandates the FPI to inform DDP and SEBI of any material change in the information. It has simplified the onboarding process of FPIs. This circular reduces the time taken for the grant of registration to FPIs due to the lengthy onboarding process of FPIs. The amendments are expected to make the onboarding process of FPIs more efficient.
Read our Article: Operational Aspect of Amendment to SEBI AIF Regulations
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