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KYC Norms Revised for Foreign Portfolio Investors: SEBI

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Markets regulator Sebi issued revised KYC norms for foreign portfolio investors, wherein resident, as well as non-resident Indians, have been permitted to hold a non-controlling stake in such entities.

Two circulars pertaining to KYC (Know Your Client) requirements and eligibility conditions for FPIs have been issued.

These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance.

NRIs, OCIs (Overseas Citizens of India) and RIs (Resident Indians) have been permitted to hold the non-controlling stake in FPIs. There would also be no restriction on them to manage non-investing FPIs Sebi-registered offshore funds as well as registered investment managers, according to the regulator.

These entities would be allowed to be constituents of FPIs subject to certain conditions. If single and aggregate NRI/OCI/RI holding is below 25 percent and 50 percent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI.

According to Sebi, FPIs can be controlled by Investment Managers (IMs) which are controlled and/ or owned by NRI, OCI, or RI. In this regard, the conditions include that the investment manager is appropriately regulated in its home jurisdiction and registers itself with Sebi as non-investing FPI.

Among others, a non-investing FPI can be directly or indirectly owned or controlled by a NRI, OCI or RI.

“The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs which are ‘offshore funds’ for which no-objection certificate has been provided by the board in terms of mutual fund regulations,” Sebi noted.

Existing FPIs and new applicants would be given two years from the date of the new norms coming into force or date of registration, whichever is later. In case of temporary breach, a time period of 90 days would be given to ensure compliance.

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