Custodian banks – which handle funds and securities trading in foreign funds on Indian exchanges – must share the names and registration numbers of foreign portfolio investors (FPI) along with BOs details with Sebi before Friday morning.
“We don’t understand the urgency of a sudden. Security have to compile data at 11 a.m. It seems to be the main priority. Sebi might have been directed by government. Even if they suspect something, we haven’t been told, “someone who knows the problem told ET.
Earlier this week, custodian banks were told to provide details of FPI’s ‘key beneficiaries’ based in China and Hong Kong amid fears that in a falling market, many registered Indian companies could face the threat of expropriation from eligible investors who could be supported. by the Chinese government.
BO is an investor who controls the funds.
On Thursday, Sebi sought greater details from the guards – asking them to scan the BO based in a group of countries (some of whom had been blacklisted by several regulatory authorities). In addition to Pakistan, Taiwan, North Korea, Iran, Myanmar, these banks must also identify FPI who have BOs from Mongolia, Bhutan, Nepal, Afghanistan, Bangladesh, and Yemen.
“Sebi has provided a list of 11 countries. Perhaps, it was to gather a broader set of information in investigating Chinese links. Or, it might try to find out whether investors from black-listed countries invest in India through FPI, based in approved regulators and jurisdictions such as Singapore, Luxembourg, or even Mauritius, “said a senior market official.
Besides functioning as a jurisdiction for funds focused on India, Mauritius is used by overseas investors and China as a gateway to African countries. Although Mauritius continues to be on the ‘gray list’ of the Financial Action Task Force (FATF), Indian authorities have recently softened the establishment of Mauritius – allowing the tax haven to be the home of category I FPI.
Custodian institutions are usually MNC banks and Indian financial services companies that also carry out the FPI KYC process and maintain UBO records from all investors who have 25% or more in FPI. If FPI is located in ‘high-risk jurisdiction’, the custodian has information (such as address, BOs declaration and ID of official signatory) from investors who own or control 10% or more in the fund. It is up to the custodian bank to categorize jurisdiction as ‘high risk’.