The Security and Exchange Board of India (SEBI) on March 26 asked the Indian stock exchanges to bar foreign portfolio investors who have failed to submit the names of beneficial owners to custodians, a media report said.
According to a report in The Economic Times, FPI assets worth $5 billion have been blocked on account of failure to adhere to the March 20 deadline of providing the aforementioned details. This includes top American investor Pacific Investment Management Company (Pimco) that manages assets worth $1.66 trillion globally.
Moneycontrol could not independently verify the report.
The report further added that FPIs have been blocked from making fresh investments but will be allowed to sell their holdings.
SEBI has asked custodians to provide a list of non-compliant FPIs and have informed brokers to not execute trades on their behalf.
“About 70 percent of the FPIs have submitted BO (beneficial owners’) details and complied fully with the know-your-client (KYC) requirement. Around 20 percent have submitted the details at the last minute. While 10 percent have not complied, SEBI has collected the statistics from custodians and shared the list with stock exchanges. The ban has started already,” people familiar with the matter told the daily.
On April 10, 2018, the market regulator had issued a circular asking FPIs to identify the beneficial owner of a fund, based on not just ownership but control as well.
In instances where there was no significant beneficial owner, senior management officials and fund managers were asked to be listed.
SEBI further asked custodians to create a centralised database, which could be accessible by other market intermediaries with the consent of FPIs.
The notification was met with backlash, with several FPIs opposing the storage of details of beneficial owners with a third party due to data secrecy laws in their countries.
Nonetheless, SEBI remained headstrong since FPIs have complied with such requirements in other countries.
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