SEBI comes out with new KYC norms for foreign investors

New Delhi, September 22: Securities and Exchange Board of India, SEBI has issued revised Know Your Client (KYC) norms, providing relief to foreign portfolio investors, FPI. Under new norms, residents, as well as non-resident Indians, have been permitted to hold a non-controlling stake in such entities.

 

There will also be no restriction on them to manage non investing FPIs, SEBI registered offshore funds as well as registered investment managers.

Certain categories of FPIs would be required to maintain a list of beneficial owners and provide the same to the regulator.

SEBI said the norms have been finalized after taking into consideration suggestions from a panel headed by former RBI Deputy Governor and comments from the public.

“The clubbing of investment limit for FPIs should not be done on the basis of beneficial owner (BO) according to PMLA Rules. Accordingly, there will be a separate set of norms for determining conditions where non-resident Indians (NRIs) and overseas citizens of India (OCIs) and resident Indians (RIs) are constituents,” Sebi said.

The KYC review, including changes in BOs and their holdings, should be done based on risk categorization of FPIs, according to Sebi norms. The norms state that in case of category II and category III FPIs from high-risk jurisdictions, the KYC review should be done on a yearly basis.

“Category II and III FPIs registered prior to this circular (existing FPIs) should provide the list of BOs and applicable KYC documentation within six months from the date of this circular,” Sebi said.

If an existing FPI fails to comply with the applicable KYC requirements by the given deadline, the custodian concerned shall not allow such FPIs to make fresh purchases till the time KYC documentary requirements are complied with. However, such FPI will be allowed to continue to sell the securities already purchased by it. Such FPI will be allowed to disinvest its holdings within a period of 180 days from the expiry of the timeline. In case the FPI remains non-compliant with the requirements even after 180 days from the said deadline, its FPI registration will no longer be valid and it would need to disinvest its holdings immediately.