Sebi issues guidelines for FVCIs outlining compliance, registration

Markets regulator Sebi on Thursday issued operational guidelines for Foreign Venture Capital Investors (FVCIs) outlining procedures for registration, compliance, and investment activities

Also, the Securities and Exchange Board of India has issued operational guidelines for Designated Depository Participants (DDPs).

The guidelines are aimed at helping FVCIs and DDPs transition smoothly to the amended FVCI regime, which will come into effect on January 1, 2025.

Under the guidelines, Sebi has outlined procedures for FVCI registration, compliance, and investment activities and also specified the role of DDPs.

The regulator has set a deadline of March 31, 2025, for all existing FVCIs to engage with a DDP. Failing to do so will restrain FVCIs from making any new investments.

 

"Existing FVCIs shall engage a DDP, to avail its services for conducting due diligence with respect to continuance of registration as an FVCI, by March 31, 2025.

"Any FVCI failing to engage a DDP by March 31, 2025, shall not be permitted to make any further investment and shall liquidate investments in listed securities, by March 31, 2026 and other investments, by March 31, 2027," Sebi said in its circular.

Proceeds from these sales are required to comply with Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating Financing of Terrorism (CFT) rules.

The guidelines also mandate that DDPs conduct eligibility checks on FVCIs within six months of engagement. If an FVCI fails to meet the required eligibility criteria, it will be restricted from making new investments, although it can hold or sell existing ones.

FVCIs with no holdings must surrender their registration within 30 days of the DDP's assessment.

Additionally, if any FVCI or its major investors appear on the United Nations Security Council's sanctions list or are no longer considered "fit and proper," Sebi will halt all transactions involving that FVCI. DDPs are required to notify SEBI within seven days of such cases.

To continue operating, FVCIs will be required to submit complete registration applications, including the required documents and fees, to their respective DDPs.