Securities and Exchange Board of India (SEBI) on 12 September 2013 issued the new Guideline to make Know Your Client requirements (KYC) easy for foreign investors. These guidelines related to registration and disclosure norms for low risk foreign investors.
SEBI classified foreign investors into three categories depending on their risk profile like category I, category II and category III.
Category I includes
Government and Government related foreign investors such as Foreign Central Banks, Governmental Agencies, Sovereign Wealth Funds, International, Multilateral Organizations and Agencies.
Category II includes
• Regulated broad based funds such as Mutual Funds, Investment Trusts, Insurance / Reinsurance Companies.
• Appropriately regulated entities such as Banks, Asset Management Companies, Investment Managers/ Advisors, Portfolio Managers.
• Broad based funds whose investment manager is appropriately regulated.
• University Funds and Pension Funds
• University related Endowments already registered with SEBI as FII/Sub Account .
Category III includes
All other eligible foreign investors investing in India under PIS route not eligible under Category I and II such as Endowments, Charitable Societies/Trust, Foundations,
Corporate Bodies, Trusts, Individuals, Family Offices.
Category I investors have been exempted from submission of documents like financial statements and board resolution papers. Their top management, partners, directors, trustees and authorised signatories would not be required to submit proof of identity, proof of address and photographs, submission of the list, identity proof, address proof and photographs for their ultimate beneficial owners.
SEBI decision to reclassify foreign investors as per their risk profiles was recommended by a committee headed by former Cabinet secretary K M Chandrasekhar.
These measures come at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies. The new norms are expected to make it much easier for the foreign investors to enter the country and make investment decisions.