" SEBI COMMITTEE MOOTS EASING OF NORMS FOR FOREIGN INVESTORS. " A committee set up by the capital market regulator and headed by former cabinet secretary KM Chandrasekhar has recommended doing away with different categories of foreign investors and simplifying the registration procedures for overseas entities to attract higher capital flows. The panel has also recommended that the current requirement for foreign institutional investors (FIIs) and sub-accounts to get registered with the Securities and Exchange Board of India (Sebi) be scrapped. Instead, entities can register with and transact through designated depository participants. The panel, which comprised representatives from the government and the Reserve Bank of India, along with various market participants, has suggested that all existing FIIs, sub-accounts and qualified foreign investors (QFIs) should be merged into a new investor class — foreign portfolio investor (FPI). Portfolio investments will be defined as an investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Any investment beyond the threshold of 10% shall be considered as foreign direct investment (FDI). The aggregate investment limit will be 24%, which is currently the default aggregate limit for FIIs, and can be raised by the company up to the sectoral cap. The panel, however, has said that the separate categories for non resident Indians (NRIs) and foreign venture capital investors (FVCIs) should be continued. The panel wants policy makers to have a risk-based approach towards know your client (KYC) requirements and create three categories of FPIs. Category 1 can include low-risk entities like government and government-related entities such as foreign central banks, sovereign wealth funds, multilateral organisations, etc. Meanwhile, category 2 can include regulated entities with a moderate risk appetite like banks, asset management companies, investment Trusts, insurance & reinsurance companies, university funds, pension funds and university-related endowments already registered with Sebi. The third category would include high-risk entities that do not fit in the other two categories. This category, would not be allowed to issue offshore derivative instruments (ODIs) or participatory notes (p-notes). Further, the ODI/p-notes issuers would continue to report directly to the Sebi. As regards the requirement of documents for registration, the panel has recommended that category 1 and category 2 entities can be exempt from submitting personal identification documents such as copy of passport, photograph, etc, of the designated officials of the FPIs. Sebi can separately prescribe the documentation needed for the three categories. "With the simplification of procedures in KYC/account opening and onboarding, etc, the committee believes it will make the experience for FPI of entering into India smoother, resulting in increasing inflows into India," stated the panel report.
Posted on: Sat, 15 Jun 2013 09:06:34 +0000
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