Know Your Client Requirements for Foreign Portfolio Investors (FPIs)
Summary
This circular mandates specific Know Your Client (KYC) requirements for Foreign Portfolio Investors, focusing on the identification and verification of Beneficial Owners. It establishes materiality thresholds for identifying beneficial owners based on ownership interest or control, with lower thresholds for high-risk jurisdictions. The document also outlines reporting formats, restrictions on Indian nationals as beneficial owners, bearer share prohibitions, and periodic KYC review schedules.
Text
Beneficial Owner (BO) is the natural person(s) who ultimately owns or controls an FPI and should be identified in accordance with Rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.
The materiality threshold for identification of BOs shall be 25% in case of company and 15% in case of partnership firm, trust & unincorporated association of persons.
In respect of FPIs coming from “high risk jurisdictions”... intermediaries may apply lower materiality threshold of 10% for identification of BO and also ensure KYC documentation as applicable for category III FPIs.
Where no material shareholder/owner entity is identified... BO shall be the senior managing official of the FPI.
BO should not be a person mentioned in United Nations Security Council’s Sanctions List notified from time to time.
BO should not be from jurisdiction, which is identified in the public statement of Financial Action Task Force (FATF) as having strategic AML/CFT deficiencies or lacking sufficient progress.
Category II & III FPIs are required to maintain a list of BOs... in following format... This List should be certified by FPI.
Non Resident Indians (NRIs) / Overseas Citizen of India (OCI) cannot be BO of FPIs... Resident Indian cannot be a BO of FPI.
It should be ensured that FPIs... have not issued any bearer shares... FPIs should certify that they have not issued and do not maintain any outstanding bearer shares.
KYC review... should be done based on risk categorization... In case of high risk clients... it should be done on yearly basis. In case of all other clients, every 3 years.
Audited Annual Financial Data... acceptable for Category III FPIs... prospectus and information memorandum are acceptable in lieu of an official constitutional document.
In respect of exempted documents, FPIs concerned should submit an undertaking to DDP/ Custodians that upon demand by Regulators/ Law Enforcement Agencies, the relevant documents would be provided.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Know Your Client Requirements for Foreign Portfolio Investors (FPIs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.