The Securities and Exchange Board of India (Sebi), capital markets regulator, is planning to ease entry norms for overseas investors by allowing direct access to foreign portfolio investors (FPIs) from certain jurisdictions. The move is expected to give a fillip to foreign investment in the country as it would end procedural delays faced by FPIs while registering in India.
On the other hand, Sebi is likely to tighten off shore derivatives instruments (ODI) or participatory notes (p-notes) regulations. The announcements were likely to be made after Sebi’s board meeting scheduled for June 21, sources said.
According to sources, the entities registered with regulators that are signatories to the International Organisation of Securities Commissions’ (Iosco’s) multilateral memorandum of understanding (MMOU) would not have to undergo the cumbersome registration process required to be eligible to invest in the Indian market. In other words, an investor ‘A’ is regulated by the UK’s Financial Conduct Authority (FCA) and hence has adhered to all know-your-client (KYC) requirements in its home jurisdiction.
As Sebi and the FCA are both Iosco signatories and hence have information-sharing pacts, A will not have to undergo the KYC process again with Sebi while investing in India. The Sebi board might also mull further relaxations to the FPI Regulations, 2014, and float a consultation paper for public feedback before enacting the changes, said sources.
“Sebi has got the feedback that lacunae in FPI regulations are dissuading a lot of investors from coming to India. Based on the suggestions, Sebi will consider providing further relaxations," a source said.Global central banks, sovereign wealth funds and pension funds are the key categories of investors which could get preferential treatment.
“While Sebi has constantly endeavored to simplify these norms, industry players still find them cumbersome and time consuming. Any relaxation of these norms will be welcomed by the industry," said Suresh Swamy, partner, PwC.
In 2014, Sebi had eased entry norms for overseas investors by introducing the FPI regulations, which merged various sub-categories into one and introduced risk-based KYC approach. The regulations also introduced the concept of designated depository participants (DDPs), which facilitated the entry of overseas investors and acted as first-level regulators.
Industry players say FPIs still face difficulties in areas like obtaining permanent account number (PAN), submission of documents, among others. “Sebi has been working closely with Iosco. The processes laid out for Iosco signatories are fairly stringent. Sebi can look to ease form for investors domiciled in countries which have strong anti-money laundering laws in place," said an official.
On the other hand, Sebi is likely to tighten off shore derivatives instruments (ODI) or participatory notes (p-notes) regulations. The announcements were likely to be made after Sebi’s board meeting scheduled for June 21, sources said.
According to sources, the entities registered with regulators that are signatories to the International Organisation of Securities Commissions’ (Iosco’s) multilateral memorandum of understanding (MMOU) would not have to undergo the cumbersome registration process required to be eligible to invest in the Indian market. In other words, an investor ‘A’ is regulated by the UK’s Financial Conduct Authority (FCA) and hence has adhered to all know-your-client (KYC) requirements in its home jurisdiction.
As Sebi and the FCA are both Iosco signatories and hence have information-sharing pacts, A will not have to undergo the KYC process again with Sebi while investing in India. The Sebi board might also mull further relaxations to the FPI Regulations, 2014, and float a consultation paper for public feedback before enacting the changes, said sources.
“Sebi has got the feedback that lacunae in FPI regulations are dissuading a lot of investors from coming to India. Based on the suggestions, Sebi will consider providing further relaxations," a source said.Global central banks, sovereign wealth funds and pension funds are the key categories of investors which could get preferential treatment.
“While Sebi has constantly endeavored to simplify these norms, industry players still find them cumbersome and time consuming. Any relaxation of these norms will be welcomed by the industry," said Suresh Swamy, partner, PwC.
In 2014, Sebi had eased entry norms for overseas investors by introducing the FPI regulations, which merged various sub-categories into one and introduced risk-based KYC approach. The regulations also introduced the concept of designated depository participants (DDPs), which facilitated the entry of overseas investors and acted as first-level regulators.
Industry players say FPIs still face difficulties in areas like obtaining permanent account number (PAN), submission of documents, among others. “Sebi has been working closely with Iosco. The processes laid out for Iosco signatories are fairly stringent. Sebi can look to ease form for investors domiciled in countries which have strong anti-money laundering laws in place," said an official.
“With the ease in registration requirements, the amendment would certainly encourage FPIs to come in directly rather than taking participatory-notes routes. This would also reduce the dependence of FPIs on designated depository participants (DDPs), who currently act as first-level regulator for them," said Sandeep Parekh, founder, Finsec Law Advisors.
The Sebi board is also likely to take a call on tightening of p-note norms. In a discussion paper floated last month, Sebi proposed to ban p-notes from taking derivatives position for purposes other than hedging. It also proposed to impose a fee of $1,000 every three years on each ODI subscribers. Sebi had given time until June 12 for stakeholders to provide feedback on the discussion paper.
Business Standard New Delhi, 14th June 2017
The Sebi board is also likely to take a call on tightening of p-note norms. In a discussion paper floated last month, Sebi proposed to ban p-notes from taking derivatives position for purposes other than hedging. It also proposed to impose a fee of $1,000 every three years on each ODI subscribers. Sebi had given time until June 12 for stakeholders to provide feedback on the discussion paper.
Business Standard New Delhi, 14th June 2017
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