Securities and Exchange Board of India (Sebi) has amended its regulations on foreign institutional investors (FIIs) to make it mandatory for FIIs to disclose all information relating to sub-accounts through joint undertakings.The amendment comes on the heels of recent penalties imposed on Citigroup and Goldman Sachs on issuing participatory notes or offshore derivative instruments to an overseas corporate body (OCB). Sebi had slapped Rs 1 crore fine each on Goldman Sachs and Citigroup for issuing PNs to Magnus Capital Corporation, an OCB, in August 2003 through their respective sub-accounts.A Sebi circular, put up on its website today, said the sub-account applicant and the FII through whom the application for registration was made should submit joint undertakings as required by Form AA.The form stipulates joint undertakings in writing stating that the sub-account is not a non-resident Indian (NRI) or an OCB. It also requires comfort on the source of income of the applicant (sub-account). Essentially, the source of income must be from known and legitimate means, and the FII through whom an application for registration of is made is authorised to invest on behalf of the sub-account.The regulator also made further amendments in the Sebi Foreign Institutional Investors (Second Amendment) Regulations, 2006 to treat overseas-registered or incorporated pension funds, mutual funds, investment trusts, insurance companies, reinsurance companies, international or multilateral agencies, foreign governmental agency or a foreign central bank as an FII.A Sebi official clarified that the market regulator used to treat these agencies as an FII on a case-to-case basis.
