Posts Tagged ‘Intermediaries’


CIRCULAR, CIR/MIRSD/2/2013, dated January 24, 2013

SEBI Registered Intermediaries:

1. Stock Brokers through Recognized Stock Exchanges

2. Depository Participants (DPs) through Depositories

3. Mutual Funds (MFs)

4. Association of Mutual Funds in India (AMFI)

5. Portfolio Managers (PMs)

6. KYC Registration Agencies (KRAs)

7. Alternate Investment Funds (AIFs)

8. Collective Investment Schemes (CIS)

9. Investment Advisers (IAs)

1. SEBI Master Circular No. CIR/ISD/AML/3/2010 dated December 31, 2010 has mandated all registered intermediaries to obtain, as part of their Client Due Diligence policy, sufficient information from their clients in order to identify and verify the identity of persons who beneficially own or control the securities account. The beneficial owner has been defined in the circular as the natural person or persons who ultimately own, control or influence a client and/or persons on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a legal person or arrangement.

2. SEBI has also prescribed uniform Know Your Client (KYC) requirements for the securities markets vide circular nos. CIR/MIRSD/16/2011 dated August 22, 2011 and MIRSD/SE/Cir-21/2011 dated October 5, 2011. The SEBI KYC Registration Agency (KRA) Regulations, 2011 have been notified and guidelines have been issued under these regulations from time to time.

3. Further, the Prevention of Money Laundering Rules, 2005 also require that every banking company, financial institution and intermediary, as the case may be, shall identify the beneficial owner and take all reasonable steps to verify his identity. The Government of India in consultation with the regulators has now specified a uniform approach to be followed towards determination of beneficial ownership. Accordingly, the intermediaries shall comply with the following guidelines.

A. For clients other than individuals or trusts:

4. Where the client is a person other than an individual or trust, viz., company, partnership or unincorporated association/body of individuals, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information:

a. The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest.

Explanation: Controlling ownership interest means ownership of/entitlement to:

i. more than 25% of shares or capital or profits of the juridical person, where the juridical person is a company;

ii. more than 15% of the capital or profits of the juridical person, where the juridical person is a partnership; or

iii. more than 15% of the property or capital or profits of the juridical person, where the juridical person is an unincorporated association or body of individuals.

b. In cases where there exists doubt under clause 4 (a) above as to whether the person with the controlling ownership interest is the beneficial owner or where no natural person exerts control through ownership interests, the identity of the natural person exercising control over the juridical person through other means.

Explanation: Control through other means can be exercised through voting rights, agreement, arrangements or in any other manner.

c. Where no natural person is identified under clauses 4 (a) or 4 (b) above, the identity of the relevant natural person who holds the position of senior managing official.

B. For client which is a trust:

5. Where the client is a trust, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the identity of the settler of the trust, the trustee, the protector, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.

C. Exemption in case of listed companies:

6. Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.

D. Applicability for foreign investors:

7. Intermediaries dealing with foreign investors’ viz., Foreign Institutional Investors, Sub Accounts and Qualified Foreign Investors, may be guided by the clarifications issued vide SEBI circular CIR/MIRSD/11/2012 dated September 5, 2012, for the purpose of identification of beneficial ownership of the client.

E. Implementation:

8. The provisions of this circular shall come into force with immediate effect. Intermediaries are directed to review their Know Your Client (KYC) and Anti-Money Laundering (AML) policies accordingly.

9. The Stock Exchanges and Depositories are directed to:

a. bring the provisions of this circular to the notice of the Stock Brokers and Depository Participants, as the case may be, and also disseminate the same on their websites;

b. make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another, as considered necessary;

c. monitor the compliance of this circular through half-yearly internal audits and inspections; and

d. communicate to SEBI, the status of the implementation of the provisions of this circular.

10. In case of mutual funds, compliance of this circular shall be monitored by the Boards of the Asset Management Companies and the Trustees and in case of other intermediaries, by their Board of Directors.

11. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.

Click here to download the above Circular in PDF Format.

Source: Securities and Exchange Board of India.


CIRCULAR, CIR/MIRSD/ 11 /2012, dated September 5, 2012

1. Stock Brokers through Recognized Stock Exchanges

2. Depository Participants through Depositories

3. Mutual funds

4. Association of Mutual Funds in India

5. Portfolio Managers

6. KYC Registration Agencies (KRAs)

7. Alternative Investment Funds (AIFs)

8. Collective Investment Schemes (CIS)

 1. This has reference to SEBI circulars No CIR/MIRSD/16/2011 dated August 22, 2011 and MIRSD/SE/Cir-21/2011 dated October 5, 2011 on know your client norms for the securities market.

2. SEBI has received representations regarding operational issues in the implementation of aforesaid SEBI Circulars in case of foreign investors viz. Foreign Institutional Investors, Sub Accounts and Qualified Foreign Investors. In consultation with the Stock Exchanges, Depositories and Intermediaries, certain clarifications are issued, as given in Annexure A, with respect to these investors.

3. Further, the intermediaries shall strictly follow the risk based due diligence approach as prescribed by SEBI Master Circular on AML No. CIR/ISD/AML/3/2010 dated December 31, 2010. Also, they shall conduct ongoing client due diligence based on the risk profile and financial position of the clients as prescribed in the Circular.

4. The provisions of this circular are applicable for both new and existing clients.

5. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

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Annexure A: Clarifications

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Click here to download the complete text of the above Circular in PDF Format- Know Your Client Requirements.

Source: Securities and Exchange Board of India.

 

 

 


Amendment to definition of Qualified Foreign Investor (QFI) and QFI Investment in Debt Mutual Fund Schemes which Invest in Infrastructure

CIRCULAR, CIR/ IMD/ FII&C/ 18/ 2012 dated July 20, 2012

All SEBI registered Intermediaries/ Recognized Stock Exchanges/ Depositories/Mutual Fund/ qualified Depository Participants (DP)

1. Vide SEBI circulars Cir/IMD/DF/14/2011 and Cir/IMD/FII&C/3/2012 dated August 09, 2011 and January 13, 2012, respectively, QFIs were allowed to invest in schemes of Indian mutual funds and Indian equity shares subject to terms and conditions mentioned therein. Subsequently, vide SEBI circular CIR/IMD/FII&C/13/2012 dated June 07, 2012 the QFI framework has been revised.

2. Amendment to definition of QFI:

In consultation with Government of India and Reserve Bank of India it has been decided that the term “person” and the phrase “resident in India” shall carry the same meaning as defined under the Income Tax Act, 1961.

Accordingly, the amended definition for QFI shall read as under:

“QFI shall mean a person who fulfils the following criteria:

(i)Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and

(ii)Resident in a country that is a signatory to IOSCO’s MMOU (Appendix A Signatories) or a signatory of a bilateral MOU with SEBI:

Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on-(i) jurisdictions having a strategic Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) deficiencies to which counter measures apply, (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies:

Provided further such person is not resident in India:

Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account or Foreign Venture Capital Investor.

Explanation.-For the purposes of this clause:

(1)The term “Person” shall carry the same meaning under section 2(31) of the Income Tax Act, 1961;

(2) The phrase “resident in India” shall carry the same meaning as in the Income Tax Act, 1961;

(3) “Resident” in a country, other than India, shall mean resident as per the direct tax laws of that country.

(4) “Bilateral MoU with SEBI” shall mean a bilateral MoU between SEBI and the overseas regulator that inter alia provides for information sharing arrangements.

(5) Member of FATF shall not mean an Associate member of FATF.

3. QFI investment in debt mutual fund schemes which invest in infrastructure

3.1. Vide SEBI circulars IMD/DF/14/2011 dated August 09, 2011 QFIs have been allowed to invest in mutual fund debt schemes which invest in infrastructure debt upto a total ceiling of USD 3 billion out of the total long term corporate infrastructure limits of USD 25 billion.

3.2. As a measure of relaxation, RBI vide circular A.P. (DIR Series) Circular No. 135 dated June 25, 2012 has relaxed investment restriction for QFI investment in debt mutual fund schemes which invest in infrastructure.

3.3. Accordingly, QFIs can now invest in those debt mutual fund schemes that hold atleast 25 percent of their assets (either in debt or equity or both) in the infrastructure sector under the USD 3 billion investment limit of debt mutual fund schemes which invest in infrastructure.

3.4. Monitoring and allocation of USD 3 billion limit of QFI investment in debt mutual fund schemes which invest in infrastructure shall be in the following manner-

3.4.1. In partial amendment to SEBI circular IMD/DF/14/2011 dated August 09, 2011 QFI can invest without obtaining approval until the overall QFI investments reaches 90% (ninety percent) of USD 3 billion i.e. USD 2.7 billion.

3.4.2. Terms and conditions related to monitoring, allocation, requirement of obtaining prior approval (after reaching 90% of investment limit) and reporting shall be as prescribed in circular CIR/IMD/FII&C/17/2012 dated July 18, 2012.

4. QFIs shall have to comply with provisions of the Foreign Exchange Management Act, 1999 (FEMA).

This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

S MADHUSUDHANAN

Deputy General Manager

Tel No.: 022-26449614

Email: smadhu@sebi.gov.in

Click here to download the complete text of the above Circular in PDF Format- CIRCULAR, CIR/ IMD/ FII&C/ 18/ 2012 dated July 20, 2012.

Source: Securities and Exchange Board of India.


CIRCULAR, CIR/ IMD/ FII&C/ 17 / 2012, dated July 18, 2012

All SEBI registered Intermediaries/ Recognized Stock Exchanges/ Depositories/Mutual Fund/ qualified Depository Participants (DP)

Vide SEBI circulars Cir/IMD/DF/14/2011 and Cir/IMD/FII&C/3/2012 dated August 09, 2011 and January 13, 2012 respectively, Qualified Foreign Investors (QFIs) were allowed to invest in schemes of Indian mutual funds and Indian equity shares subject to terms and conditions mentioned therein by opening a demat account with a qualified Depository Participant (DP). In consultation with the Government of India (GoI) and RBI, it has now been decided to allow QFIs to invest in Indian corporate debt securities and debt schemes of Indian mutual funds.

2. The QFI transactions shall be limited to the following debt securities:

i. Purchase and sale of corporate debt securities listed on recognized stock exchange(s);

ii. Purchase of corporate debt securities through public issues, if the listing on recognized stock exchange(s) is committed to be done as per the extant provisions of the Companies Act, 1956;

iii. Sale of corporate debt securities by way of buyback or redemption by the issuer;

iv. Purchase and sale of units of debt schemes of Indian mutual funds.

3. The provisions relating to FIIs in case of non-listing of “to be listed” corporate bonds within fifteen days as per SEBI circular CIR/IMD/FIIC/18 /2010 dated November 26, 2010, shall be applicable to QFIs.

4. Limits for investment in corporate debt–QFIs are permitted to invest in corporate debt securities (without any lock-in or residual maturity clause) and mutual fund debt schemes subject to a total overall ceiling of USD 1 billion. This limit shall be over and above the limit of USD 20 billion for FII investment in corporate debt and shall be monitored and allocated in the following manner

4.1. QFI can invest without obtaining prior approval until the aggregate QFI investments reaches 90% (ninety percent) of USD 1 billion i.e. USD 0.9 billion.

4.2. Monitoring and allocation of investment limits shall be broadly in terms of SEBI circular dated January 13, 2012.

4.3. The depositories shall administer and monitor, so as to ensure, that aggregate investment of all QFIs shall not be more than 90% of the investment limit.

4.4. The depositories shall jointly publish/ disseminate the aggregate investment of QFIs to public, on daily basis.

4.5. When the aggregate investments of all the QFIs reaches 90% of the investment limit, notice informing the same shall be published by the depositories on their websites and no fresh purchases shall be allowed without prior approval of the depositories. The same shall be informed by the depositories to the DPs and recognized stock exchanges having nationwide terminals. The depositories shall also inform the DPs and such stock exchanges when aggregate investments of all the QFIs fall below 90% of the investment limits.

4.6. For fresh purchases by QFIs after the investment limit reaches 90%, prior approval of the depositories shall be obtained. The QFI shall make such request for prior approval to the concerned depository through the DP specifying therein the name of the QFI, PAN and other unique identification number relating to that QFI, by way of any mode of communication as specified by the depositories in consultation with each other. The concerned depository shall provide the details of prior approval requests received by it to the other depository.

4.7. After market hours, the depository shall give approval to request for purchase on a first-come-first-served basis in co-ordination with the other depository, based on time of receipt of the prior approval requests by the depositories. The validity of the approval shall be for the next trading day only.

4.8. In case the aggregate shareholding of the QFI exceeds overall investment limit, the depositories shall jointly notify the respective DPs regarding the breach along with the names of the QFI due to whom the limits have been breached. For this purpose, the stock exchanges shall provide the required information so as to enable the depositories to identify the transaction details of the QFI including the name of QFI, PAN and/ or other unique identification number relating to that QFI, purchase quantity and time or any other information as may be required by the depositories.

4.9. In case the aggregate shareholding of the QFIs exceeds overall investment limit for whatsoever reason, the QFI due to whom the limit is breached shall mandatorily divest excess holdings within three working days of such breach being notified by depositories to the DP. The DP shall obtain necessary authorization from the QFI at the time of account opening for such divestment of excess holdings.

5. Know Your Customer (KYC) – DPs will ensure KYC of the QFIs as per the norms prescribed by SEBI in circular dated January 13, 2012 and SEBI circulars issued in this regard from time to time. AD Category banks will also ensure KYC of the QFIs for opening and maintenance of the single non-interest bearing Rupee Accounts as per the extant norms prescribed by RBI.

6. All the other stipulations prescribed by SEBI in circular dated January 13, 2012 regarding QFI investment in equity shall apply mutatis mutandis.

7. Reporting – In addition to the reporting to RBI as may be prescribed by them, DPs will also ensure reporting to SEBI in a manner and format as prescribed by SEBI from time to time.

This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

S MADHUSUDHANAN

Deputy General Manager

Tel No.: 022-26449614

Email: smadhu@sebi.gov.in

Click here to download the complete text of the above Circular in PDF Format- QFI Investment in Corporate Debt.

Source: Securities and Exchange Board of India.