SEBI eases KYC norms for foreign investors
New Delhi: Making Indian capital markets an easier place to invest, SEBI Thursday relaxed registration and disclosure norms for low-risk foreign investors and exempted the low-risk overseas entities from tedious paper work.
SEBI also classified foreign investors eligible to make portfolio investments in the country under three broad segments as per their risk profile, while putting the government and other sovereign entities in the lowest-risk Category I.
Well-regulated entities like mutual funds, insurers, investment trusts, banks, university funds and pension funds have been put in the medium-risk Category II, while others such as corporate bodies, individuals and family offices have been classified in the Category III.
Accordingly, the Know Your Client (KYC) requirements -- which entails submission of various documents and disclosures to get registered and operate in Indian markets -- would be eased for those with low-risk profile.
Given their lowest risk profile, Category I investors have been exempted from submission of documents like financial statements and board resolution papers, while their top management, partners, directors, trustees and authorised signatories would not be required to submit proof of identity, proof of address and photographs.
Besides, such entities would also be exempted from submission of the list, identity proof, address proof and photographs for their ultimate beneficial owners, SEBI said in a late evening circular.
These measures come at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies.
The new norms are expected to make it much easier for the foreign investors to enter the country and make investment decisions.
SEBI's decision to reclassify foreign investors as per their risk profiles follows recommendations made by a committee headed by former Cabinet Secretary K M Chandrasekhar in this regard. The proposals were approved by SEBI in its board meeting in June and thereafter the regulator had referred the recommendations to the Government of India for implementation.
SEBI is merging different classes of investors such as FIIs, their Sub Accounts and Qualified Foreign Investors (QFIs) into a new category, FPIs, to put in place a simplified and uniform set of entry norms for them.
SEBI said the provisions of this circular would be applicable for both the new and existing clients.
The KYC requirements would be simplest for the first category and most stringent for the third class.
Besides, Category II investors are required to submit documents like board resolution paper, SEBI's registration certificate and power of attorney with the mention of address, while they have been exempted from producing financial statement.
However, senior management, authorised signatories and ultimate beneficial owners of Category II investors have been exempted from submission of proof of identity, proof of address and photographs.
Similarly in the Category III investors are required to to submit documents like board resolution paper, power of attorney with the mention of address and financial statement,
Besides, senior management of the Category III investors are needed to submit their proof of identity and proof of address.
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