Market regulator Sebi today asked depository participants to set up adequate infrastructure and put in place an appropriate monitoring system to ensure proper functioning of the Foreign Portfolio Investors (FPI) regime.
Designated Depository Participants (DDPs), who would grant registration to FPIs on behalf of the regulator, are required to submit periodic reports about this new class of investor category to Sebi.
FPIs will encompass all Foreign Institutional Investors, their sub-accounts and Qualified Foreign Investors. The new regime will commence from June 1.
Sebi said in a circular that every DDP will maintain arms length distance from other businesses carried out by it.
Further, officers and employees engaged in carrying out functions of DDPs will not be engaged in any other activity, and directly report to its chief compliance officer.
DDP will have necessary infrastructure, including adequate office space and sufficient as well as competent manpower. It will have a complete manual, setting out the systems.
"Every DDP shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating its controls, systems, procedures and safeguards. Further the DDPs shall carry out internal audits of their systems," Sebi said.
The move is aimed at ensuring proper functioning of the FPI regime.
Sebi said that every DDP will submit the report about FPI to Sebi by 10th of the following month in a prescribed format. This report will consist of informations like name and category of the applicant, application as well as receipt date among others.
Besides, DDP will carry out an annual review of its systems, procedures and controls by an expert. The review will cover the systems and procedures being followed by them to meet its obligations towards its clients, regulators and other relevant bodies.
The DDPs will furnish an annual audit report on its internal control for a particular calendar year within three months of the next year. Further, they would also provide Action Taken Report (ATR), if any, on the audit report on a quarterly basis.
Under the new norms, FPIs have been divided into three categories as per their risk profile and the KYC (know your client) requirements.
The new FPI regulations was put in place to make an easier registration process and operating framework for overseas entities seeking to invest in Indian capital markets.
