It refers to the management of assets. It is the direction of clients assets i.e. cash or secur...
To provide relief to the FPI (Foreign portfolio Investor), SEBI came out with the revised KYC norms for FPIs & eligibility criteria for FPIs.
Recently in September 2018, SEBI issued revised KYC norms for FPIs (Foreign Portfolio Investors). Under this, Indian resident as well as non resident Indians can non controlling stake in FPIs.
SEBI issued two circulars, one is related to KYC norms and another is eligibility criteria of FPIs. Before the revision of these norms, various changes have been suggested to the proposed guideline earlier. SEBI clarified the process of identification of Beneficial Owners (BO) for FPIs.
Now Indian residents, Non Resident Indian and Overseas Indian citizens can hold non controlling stake in FPIs. As per the SEBI, now there will be no restriction in managing non-investing FPIs, SEBI registered offshore funds & registered investment managers.
For FPIs, KYC and eligibility norms have been eased by the SEBI. SEBI has prescribed that for KYC, beneficial ownership criteria in Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PMLA Rules) should be applied. Clubbing of investment limit will not be on the basis of beneficial owner for FPIs.
On the basis of the certain conditions, such entities would be allowed to be constituents of FPIs. Like such entities would be permitted to be constituents of FPIs in case holding of Indian Resident, Non Resident Indian and Overseas Indian citizens is less than 25% (single holding) & 50% (aggregate holding) of the assets under management in FPIs.
FPIs can be controlled by Investment Mangers which are owned by Indian Resident, Non Resident Indian and Overseas Indian citizens, as per SEBI.
In relation to this, Investment manager is regulated in its home jurisdiction and registers themselves as non investing FPIs with SEBI.
On the basis of the risk profile, FPIs have been categorized into three categories;
Besides the disclosure requirements of personal details there is an identification framework of the senior officials of FPIs and beneficial owners of listed entities.
Information of the real owners should be provided by the FPIs where there is company or trust which is represented by lawyers & accountants.
However, if the beneficial owner exercise voting rights, enter into agreements or arrangements then it should also be specified. These rules will also be applicable on investors using participatory notes.
Regulator clarified that exempted documents would be provided at the time of investigation or inquiry. For this, an undertaking should be submitted by the FPIs to the designated depository participants that relevant documents would be provided on the demand of the authority.
KYC documents should be maintained for at least five years by the custodian from the date of the cessation of transaction with the concerned FPI. While in case of pending litigation, till the completion of proceedings records should be maintained.
As per the regulator, separate circular will be issued regarding the clubbing of investment limit for FPIs.
As per the FPIs it could lead the outflow of money managed by non resident Indians, overseas Indian residents as they would be disqualified from making investment in India. Within six months FPIs category II & III should provide the beneficial owner list and applicable KYC documentation as per the regulator however the deadline was extended to December.
Subject to the following conditions RIs, NRIs and OCIs should be permitted to invest in FPIs:
As per the analysts, there might be no immediate impact on investor sentiment.