statesman news service
KOLKATA, 12 JUNE: In a move to attract more foreign capital to India, a Sebi-appointed panel today came out with a number of suggestions, including simplification of registration procedure for foreign investors and risk-based approach to KYC.
The committee, under the chairmanship of former Cabinet secretary Mr KM Chandrasekhar and comprising other representatives from the government, the Reserve Bank of India and various market participants, said that existing foreign institutional investors, sub-accounts and qualified foreign investors (OFI) should be merged into a new investor class to be termed as “foreign portfolio investor” (FPI).
In another significant change to make the procedure simpler, the committee recommended that prior direct registration of foreign institutional investors and sub-accounts with the Securities and Exchange Board of India should be done away with. Instead, it said, FPIs would be able to register themselves with and transact through designated depository participants (DDPs). The qualification of DDPs would be as prescribed by the Sebi.
As regards KYC (know your client), the committee is in favour of adopting risk-based approach, and said that FPIs should be divided into three categories ~ Category I (low risk), Category II (moderate risk) and Category III (high risk).
The panel said portfolio investments shall not exceed 10 per cent of the equity of an Indian company. Any investment beyond the threshold of 10 per cent shall be considered as foreign direct investment (FDI), it said.
With regard to issuance of offshore derivative instruments (ODI)/participatory notes (PN), the committee recommended that FPIs belonging to the Category III shall not be allowed to issue ODI/PN. Further, ODI/PN issuer FPIs will continue to report directly to the Sebi, as prescribed by the market regulator, it said.
In view of the special nature of the investments from non-resident Indians (NRIs) and foreign venture capital investors (FVCIs), the committee felt it was desirable to continue with these two classes for the time being. NRIs will continue to have individual investment limit of five per cent and aggregate investment limit of 10 per cent, it said.
In case of FVCI, the committee felt that the present list of nine sectors should be considerably expanded. Alternately, a negative list may be announced by the government so that the rest of the sectors are opened for VCF activity.
"With the simplification of procedures in KYC/account opening and onboarding etc., the committee believes it will make the experience for FPI of entering into India more pleasuresome and smooth, resulting in increasing inflows into India," it said.
More powers to probe insider trading
NEW DELHI, 12 JUNE: Capital market regulator Sebi will soon get powers to summon phone call records, emails and SMSes of persons it is probing for insider trading and other market manipulations.
With these powers, the Securities and Exchange Board of India aims to prevent black money coming into the market as well as to keep an eye on insider trading.
Sebi’s plea for such powers has been endorsed by the finance ministry which late last month wrote to the ministry of home affairs for designating the capital market regulator as agency authorised to receive call data records (CDR).
Sources said economic affairs secretary Mr Arvind Mayaram late last month wrote to the home secretary seeking designating Sebi as an agency authorised to be a recipient of CDR information related to calls, emails and SMSes under the Indian Telegraph Act, 1885. pti