INSUBCONTINENT EXCLUSIVE:
MUMBAI: A lobby group representing global banks and asset managers, such as Blackrock, Amundi, BNY Mellon and Capital Group, has written to
the Securities and Exchange Board of India opposing the HR Khan committee recommendation that would give the capital markets regulator more
The panel, in its report, proposed that Sebi should have powers to summon and inspect additional documents of those foreign portfolio
investors (FPIs) which come from high risk jurisdictions.
Currently, FPIs submit only information of their beneficial owners (BO) to Sebi
However, the committee now wants the market regulator to have powers to ask for more details including complete investor data if the fund is
based out of a high-risk jurisdiction.
The Asia Securities Industry and Financial Markets Association (ASIFMA) has questioned the need for
industry body has also expressed concerns about reintroduction of the concept of highrisk jurisdictions
Last year, Sebi tried to introduce the concept, but a backlash from FPIs forced the regulator to withdraw it.
These reservations of FPIs
primarily stem from privacy related concerns
Foreign funds are not comfortable sharing their complete investor information with Sebi, said a global custodian on condition of
For instance, a large number of FPIs are actually fund of funds -- which hold a portfolio of several other funds
Ascertaining client details in such cases would be difficult.
Sebi had tweaked the Know Your Customer (KYC) requirements for FPIs in
September last year and made it mandatory for them to submit the identification documents of their beneficial owners
This has already added to the compliance burden on FPIs, say experts
While Category I FPIs are exempt from these requirements, category II FPIs, who hold bulk of the FPI assets in India, have been impacted by
the new KYC requirement.
The HR Khan committee said these special requirements should be applied to funds coming from high-risk
However, there is no clarity yet about which countries would feature in the high-risk list
Last year, Sebi tried to implement a common high-risk jurisdiction list, but it was forced to go back on the proposal due to stiff
The list essentially comprises the countries whose transparency standards are not up to the mark and aims to impose additional compliance
asked global custodians to draw a consensus list of high-risk jurisdictions
However, each of the custodian bank has its own metrics to decide risk
The issue escalated after some custodians included popular investment destinations such as Mauritius in the list.
Sebi is not willing to
Following the concerns about high-risk jurisdictions list, Sebi asked each custodian to maintain its own
list.
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