Sebi may ease ownership norms for foreign funds: report

While Sebi’s new rules require funds to follow KYC norms and be more transparent in their operations, a panel set up by the market regulator is looking at easing ownership norms for funds, reports quoting sources with direct knowledge of the matter said.

Foreign funds used to opaque ways of operations have come out against the new rules saying that KYC norms would require substantial restructuring or shutting down of most entities, which would lead to large outflows from the equity markets. 

Sebi had, on 10 April, issued a circular clarifying the 'Know Your Client’ (KYC) norms but did not explicitly say the norms are meant to support foreign investments into India.

Under the Sebi (Foreign Portfolio Investors) Regulations, 2014 (FPI Regulations), NRIs are not eligible to obtain registration as FPIs, mainly because of fears of money laundering by vested interests. 

However, the entire group of the Indian-origin fund managers cannot be seen as a conduit for money laundering.

The Sebi circular also seeks to do away with allowing NRIs as foreign portfolio investors, as was allowed earlier. The Sebi circular has also confirmed that NRIs/OCIs cannot be beneficial owners of FPIs.

The debate has now turned into NRI versus foreign funds, clearly skirting the issue of money laundering. The entire group of the Indian-origin fund managers cannot be seen as a conduit for money laundering, they argue.

A draft report circulated among members by a committee set up by Sebi, last week, suggested addressing some of the concerns of asset managers. The panel, headed by HR Khan, former deputy governor of the Reserve Bank of India, is scheduled to meet today and has invited representation from Asset Managers Roundtable in India, say reports.

The Khan panel’s proposals, once finalised, will be presented to the Sebi board after consultation with the Finance Ministry.