{"id":27524,"date":"2018-10-23T14:34:46","date_gmt":"2018-10-23T09:04:46","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=27524"},"modified":"2018-10-23T14:34:46","modified_gmt":"2018-10-23T09:04:46","slug":"avoidable-suspense","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/avoidable-suspense\/","title":{"rendered":"Avoidable suspense"},"content":{"rendered":"<p><strong><a href=\"https:\/\/www.thehindu.com\/opinion\/editorial\/avoidable-suspense\/article24929092.ece\">Avoidable suspense<\/a><\/strong><\/p>\n<p><strong><u>News<\/u><\/strong><\/p>\n<ol>\n<li>SEBI board will meet to give final shape to FPI regulations.<\/li>\n<\/ol>\n<p><strong><u>Important Facts<\/u><\/strong><\/p>\n<p>2. Total portfolio investment in Indian Market is estimated at $450 billion.<\/p>\n<p>3. Asset Managers Roundtable of India \u00a0(AMRI) warned that SEBI circular disqualifies $75 billion of portfolio investment.<\/p>\n<p><strong><u>Background<\/u><\/strong><\/p>\n<p>4. On April 10th, SEBI in a circular issued new structural guidelines for FPIs of certain category.<\/p>\n<p>5. The FPI norms have been in the news in the recent past with overseas investors objecting to the circular issued in April.<\/p>\n<p>6. SEBI asked a working group headed by H.R. Khan to look into the concerns expressed by FPIs and give suggestion.<\/p>\n<p>7. SEBI has put out the Panel\u2019s recommendation for public opinion.<\/p>\n<p><strong><u>Analysis of Circular<\/u><\/strong><\/p>\n<p>8. The Circular issued to enhance Know Your Client Norms ended up imposing a blanket ban on certain types of investments where NRIs, PIOs or OCIs were investors.<\/p>\n<p>9. Critics argued that the circular disallowed NRI and OCI from managing investment on behalf of foreign investor but the circular was<\/p>\n<ul>\n<li>In accordance to FPI regulation in 2014.<\/li>\n<li>SEBI never had an objection to NRIs and RIs managing FPIs, provided they did not invest their own fund through them.<\/li>\n<li>\u2018The only restriction was that a significant part of the investment could not be proprietary fund because that would make the investment managers as Beneficial Owners(BO)<\/li>\n<\/ul>\n<p>10. Circular laid down that NRIs and OCIs cannot be beneficial owners in FPI else they have to be liquidated.<\/p>\n<ul>\n<li>Allowing these investors to hold substantial stakes in FPIs would be akin to allowing them a back door entry in to Indian Market.<\/li>\n<\/ul>\n<p>11.\u00a0 \u00a0<strong>Ceiling to invest in a stock<\/strong><\/p>\n<ul>\n<li>FPI: 24% of paid up capital.<\/li>\n<li>NRI: 10% of paid up capital.<\/li>\n<\/ul>\n<p>12. Primary intention of the circular was to identify a natural person as the owner of each FPI such that round tripping could be curbed.<\/p>\n<p>13. The circular tried to pin the <strong>Beneficial Owner<\/strong> of each FPI by rule laid down in <strong>Prevention of Money Laundering Act (PMLA).<\/strong><\/p>\n<p>14.\u00a0 \u00a0<strong>Who are beneficial owners?<\/strong><\/p>\n<ul>\n<li>25 % FPI if investor is a company.<\/li>\n<li>15% if investor is a partnership firm, trust or person.<\/li>\n<\/ul>\n<p><strong><u>HR Khan Committee Recommendations<\/u><\/strong><\/p>\n<p>15.\u00a0 \u00a0Acknowledged that using PMLA for identifying BO is not right.<\/p>\n<ul>\n<li>Recommended that the threshold for identifying BO can be 25% of the Asset under Management (AUM) in case of a single NRI\/OCI\/RI.<\/li>\n<li>AUM of entities should be below 50%.<\/li>\n<li>In case these entities hold more than the prescribed limit, they have to liquidate the portion of assets exceeding the limit or transfer it to someone else.<\/li>\n<\/ul>\n<p>16. The committee recommended for the extension of the deadline for complying with the circular. It also recommended a 180 day window if the investor breaches the threshold fund.<\/p>\n<p><strong><u>Conclusion<\/u><\/strong><\/p>\n<ol start=\"17\">\n<li>Attempts to curb Round-tripping is important but treating all FPIs with Indian origin managers as potential conduit of illicit money is unwise.<\/li>\n<li>\u00a0\u00a0This could have been avoided if SEBI had dialogue with the stakeholders.<\/li>\n<li>\u00a0\u00a0Policy uncertainty and sharp about turns should be avoided as it dents India\u2019s credibility among global investors.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Avoidable suspense News SEBI board will meet to give final shape to FPI regulations. Important Facts 2. Total portfolio investment in Indian Market is estimated at $450 billion. 3. Asset Managers Roundtable of India \u00a0(AMRI) warned that SEBI circular disqualifies $75 billion of portfolio investment. Background 4. On April 10th, SEBI in a circular issued&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/avoidable-suspense\/\">Continue reading <span class=\"screen-reader-text\">Avoidable suspense<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-27524","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704946130},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27524","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=27524"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27524\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=27524"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=27524"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=27524"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}