SEBI Clarifies on Investment Limit for FPIs Owned by Foreign Govts
Two or more foreign government-related entities from the same jurisdiction will be considered a single foreign portfolio investor (FPI) and will be eligible to invest up to 10% in a listed Indian company, market regulator Sebi said. “However, in cases where government of India enters into agreements or treaties with other sovereign governments and where such agreements or treaties specifically recognise certain entities to be distinct and separate, Sebi may, during the validity of such agreements or treaties, recognise them as such, subject to conditions as may be specified by it,” Sebi said in a clarification on Tuesday.
The regulator said World Bank Group — IBRD, IDA, MIGA and IFC — have been exempted from clubbing of the investment limits for the purpose of application of 10% limit for FPI investments in a single listed firm.Sebi said various stakeholders had sought guidance on clubbing of investment limits to be applied to foreign government and its related entities. The regulator said if the same set of beneficial owner invest through multiple entities, such entities will be treated as part of same investor group and their investment limits will be clubbed as single FPI.
FPIs investing in breach of the prescribed limit will have to divest their holdings within five trading days from the date of settlement of the trades causing the breach. Besides, the investment by such investors will be considered as investment under foreign direct investment.
DETAILED FRAMWORK ON BENEFICIAL OWNERS OF FPIS
Sebi also came out with a detailed framework in order to identify and verify beneficial owners of FPIs. Beneficial owner is the natural person, who ultimately owns or controls an FPI. Under the framework, beneficial ownership of FPIs having structure of company or trust should be identified on controlling ownership interest and control basis. In case of partnership firm and unincorporated association of individuals, BOs should be identified on ownership or entitlement basis, Sebi said in a circular.
The Economic Times, New Delhi, 11th April 2018