The markets regulator has asked foreign portfolio investors (FPIs) to provide information on certain client identification, know your customer (KYC) and beneficial ownership (BO) requirements.
In an email communication to the designated depository participants (DDPs) who manage these FPIs, the Securities and Exchange Board of India (Sebi) has asked them to identify the parent institution as the legal entity and not the sub-funds.
According to the legal players, DDPs have been asked to complete the KYC at the legal entity level and update BO data by September 30. On failure to comply, the FPIs will not be permitted to make fresh investments and surrender the registration by March 31, 2024.
“Sebi has mandated that only a legal entity should become (the) client of a DDP. Thus, a bank and not its branch which may be registered as an FPI with Sebi, or an entity and not its sub-funds investing in India as FPIs, should be the client of the DDPs. However, such legal entities should be able to obtain multiple FPI registrations in the name of their funds / sub-funds,” observed Nishith Desai Associates in a note.
Though no official circular has been issued by the market watchdog, the efforts are being seen in the light of identifying the actual entity operating these FPIs.
The recent report by the expert panel constituted by the Supreme Court in the Adani-Hinengroup matter too had highlighted the roadblocks being faced by Sebi in identifying the ultimate chain of ownership in certain FPIs and their contributors. The major challenge has emerged due to the amendment in the definition of ‘opaque structures’ for FPIs under the Prohibition of Money Laundering Act (PMLA), the panel had observed.
