Know Your Client Requirements for Foreign Portfolio Investors (FPIs)
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....) Sir/ Madam, Subject: Know Your Client Requirements for Foreign Portfolio Investors (FPIs) 1. This has reference to SEBI circular No CIR/MIRSD/11/2012 dated September 05, 2012 and subsequent SEBI circular No. CIR/MIRSD/07/2013 dated September 12, 2013 whereby risk based documentation requirements were prescribed for Know Your Client (KYC) requirements of eligible foreign investors classified as category I, II and III investing under Portfolio Investment Scheme (PIS) route. KYC of FPIs is accordingly being done. 2. Upon a review, it has been decided to make the following changes :- (a) Identification and verification of Beneficial Owners (i) Beneficial Owner (BO) is the natural person(s) who ultimately owns or controls an FPI and sho....
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....ner with holdings equal & above the materiality thresholds in the FPI need to be identified through the aforesaid look through principle. (vi) Where no material shareholder/owner entity is identified in the FPI using the materiality threshold ((referred at (iii) & (iv) above) for controlling ownership interest basis and also on control basis (for companies and trusts), BO shall be the senior managing official of the FPI. (vii) In case of companies/ trusts represented by service providers like lawyers/ accountants, FPIs should provide information of the real owners/ effective controllers of those companies / trusts. (viii) If the BO exercises controls through means like voting rights, agreements, arrangement etc., that should also be speci....
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....ths from the date of this circular. (c) Indians as BO of FPIs In reply to FAQ 91, it has been clarified that "NRI/PIO is not eligible to make investments as an FPI. Accordingly, a company which is majority owned by one or more NRI/PIOs shall not be allowed to make investments as an FPI. However, if such company is appropriately regulated it may be given registration as Category II FPI for the purpose of acting as investment manager for other FPIs. This position is the same as in FII regime where companies promoted by NRIs were registered as non investing FIIs." In order to bring further clarity, it is informed that Non Resident Indians (NRIs) / Overseas Citizen of India (OCI) cannot be BO of FPIs. However, if an FPI is Category II Inves....
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....s any change in material information / disclosure. It is however decided that there should be comprehensive KYC review of FPIs on a periodical basis. The KYC review (including change in BOs / their holdings) should be done based on risk categorization of FPIs. In case of high risk clients (including those coming from high risk jurisdictions) it should be done on yearly basis. In case of all other clients, the KYC review should be conducted every 3 years preferably at the time of continuance of FPI registration. (f) KYC documentation for Category III FPI The stakeholders have requested for clarifications on KYC documentations for category III FPIs. Sl. No. Query Present Status Reply 1 There is uncertainty around the specific financi....
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....ration on letter head" be provided by them. In respect of (i) and (ii) above, the existing FPIs should provide these documents within six months from the date of this circular. 3. In view of manner of identifying Beneficial Ownership of FPIs having been specified in this circular, it is decided that clubbing of investment limit for FPIs shall also be on said basis. All existing FPIs whose clubbed investment in equity shares of a company is in breach of the provisions of Regulation 21(7) in view of this circular are hereby given time of six months from the date of this circular to ensure compliance. In respect of any future breach of clubbing limit, there shall be two options:- (a) The said investments shall be treated as Foreign Direct....