Collective investment vehicles putting in their money through the foreign portfolio investment route cannot have non-resident Indians as beneficial owners, according to Sebi, reported PTI. Providing clarity on norms pertaining to Category II FPIs, the markets regulator said beneficial owners of such investments should be identified in accordance with provisions under Prevention of Money Laundering rules. Appropriately regulated institutions, persons, broad-based funds, university funds and pension funds, among other entities come under Category II.
Sebi today came out with clarifications with respect to investment by certain category II FPIs. With regard to the collective investment vehicle of private banks/ merchant banks investing on behalf of clients, the regulator said they should have fulfilled know your client(KYC) norms. "The client/ investor or their BO (Beneficial Owner) should not be Resident Indian/ NRI/ Overseas Citizen of India," it said. Apart from ensuring that client should not have opaque structures, Sebi said the collective investment vehicle of the bank should be broad-based -- more than 20 investors and with no investor having over 49 per cent stake. At present, appropriately regulated broad-based insurance/re-insurance companies are investing proprietary funds and for unit linked/ investment products.
"In this regard, it is clarified that investment in India by insurance/ re-insurance companies must be maintained as an undivided common portfolio. Segregated portfolio or investor/ policy-holder level investment structure shall not be permitted," the regulator said. About asset management companies, investment managers, advisers, portfolio managers, broker-dealer and swap-dealer under Category II, Sebi said they are are permitted to invest their proprietary funds.
"These appropriately regulated persons by taking separate registration can also invest with client funds as an ODI issuing FPI or after fulfilling the condition of being broad based and having a common portfolio. "However, asset management companies having thematic portfolios can also have segregated structure if each theme is broad based," the regulator said in a circular.