Offshore parents of FPI’s to be considered ‘Legal entity’: Report
The parent organisations of Foreign Portfolio Investors (FPIs) trading on Indian stock exchanges, that are incorporated in jurisdictions like Luxembourg and Singapore will now have to declare themselves as the “legal entities” of such FPIs, a report said.
This will make the parent organisations of FPIs as the ‘client’ of the fund custodian, making a significant change in the current compliance framework, as per a report in Economic Times.
Generally, the FPIs registered with the Securities & Exchange Board of India (Sebi) are subsidiaries of foreign mother institutions and they are registered in the name of the sub-fund or the branch of a bank. These FPIs, or the sub funds, are the clients of the custodian, while their parent organisations are not.
These custodians, also known as designated depository participants (DDPs), act as the bookkeepers of FPIs and typically are MNC banks and local non-bank institutions who keep custody of the securities of FPIs.
As per the ET report, the new system will mandate custodians to carry out the KYC process of the parent organisations as the main legal entity. This will be over and above that of the sub-funds.
The custodians have recently reached out to their FPI clients seeking declaration from the fund parents, ET report said quoting sources.
The parent entities will have to inform whether it is registered as an FPI or has sub-funds operating as FPIs, under Sebi’s new declaration format. In either case, the parent will be considered as the ‘legal entity’. The sub-funds will also be required to tag the parent’s name for registration, the report added.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.