Sebi committee mulls simpler norms for foreign investors

A Sebi panel has asked for simplifying the rules for foreign institutional investors (FII) entering the stock market.

The panel led by former cabinet secretary KM Chandrasekhara has suggested doing away with direct registration of foreign institutional investors with Sebi and reducing the KYC process for well-regulated entities. The recommendations sit well with a parallel committee set up by the finance ministry to examine the larger issue of reducing the differential between FII and FDI as well as reviewing entry norms for foreign investors.

The committee on 'Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments' has suggested merging FIIs, sub accounts and Qualified Foreign Investors into one class, that of foreign portfolio investor. The committee has, however, recommended that NRIs and foreign venture capital investors should be treated separately from the omnibus definition.

In Budget 2013-14 finance minister P Chidambaram had announced plans in March to converge regulation norms for FIIs across various regulators.

The Chandrasekhar committee also said proposed to keep the aggregate investment limit for FPIs at 24 per cent that for NRIs stand at an aggregate of 10 per cent. It has proposed to split FPIs into three categories — Category I — low risk (central banks, sovereign wealth funds), Cat II — moderate risk (regulated entities such as banks, asset management companies, broad based funds already registered with Sebi) and Cat III — high risk and has kept the KYC formalities minimal for the first two categories.

Easing the process for FPIs the committee said that prior registration of FIIs and sub-accounts with Sebi will not be required.

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