Increasing scrutiny on FPIs, Sebi mandates declaration of legal-entity identitifier for non-individual investors

The regulator has increased its scrutiny over FPIs over the last few months.

The market regulator has mandated declaring the legal entity identifier (LEI) for non-individual foreign portfolio investors (FPIs) “to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis”.

Until now, sharing of this could done on a voluntary basis. The regulator has increased its scrutiny over FPIs over the last few months.

In June 28, the Securities and Exchange Board of India (Sebi) approved an amendment to SEBI (Foreign Portfolio Investors) Regulations, 2019, which seeks additional disclosures from FPIs that fulfil certain criteria.

This latest circular on LEIs released by Sebi stated, “Presently, FPIs are required to provide their LEI details in the Common Application Form (“CAF”), used for registration, KYC and account opening of FPIs on a voluntary basis. It has now been decided to mandate the requirement of providing LEI details for all non-individual FPIs. Depositories shall carry out the necessary modifications to the CAF in their Portals.”

Also read: Additional disclosure norms for select FPIs will apply irrespective of privacy norms in domicile country: Sebi

Existing FPIs, including those applying for renewal, that have not already provided their LEIs to their designated depository participant (DDPs) have been asked to do so within 180 days from the date of issuance of the circular. If this isn’t complied with, the FPI’s account will be blocked for further purchases until LEI is provided to their DDPs.

All fresh registrations, subsequent to issuance of this circular, shall be carried out upon receipt of the FPIs’ respective LEI details, the circular added.

The foreign investors have been asked to ensure that their LEI is active at all times. Accounts of FPIs whose LEI code has expired/lapsed will be blocked for further purchases in the securities market till the time the LEI code is renewed by such FPIs, stated the circular.

Also read: FPIs stay invested in Indian equities; put in Rs 43,800 cr this month

Through the June circular, Sebi stated that FPIs holding more than 50 percent of their Indian equity assets under management (AUM) in a single Indian corporate group; or that individually or along with an investor group holds more than Rs 25,000 crore of equity AUM in the Indian markets would need to disclosure additional granular level details regarding entities that hold the FPIs’ ownership, economic interest, and control.