Bar high-risk FIIs from P-notes: Sebi panel

The Sebi Committee under the chairmanship of KM Chandrashekhar, a former Cabinet secretary, on Wednesday submitted its report recommending rationalisation of foreign portfolio investment routes in order to attract more inflows into India.

The committee has suggested a single investor class to be termed as foreign portfolio investor (FPI) instead of the various existing categories like foreign institutional investors (FIIs), sub accounts and qualified foreign investors (QFIs). The aggregate investment limit for FPIs would be 24%.

The committee has also recommended doing away with prior direct registration requirement for FIIs and sub accounts with Sebi. “Instead, FPIs would be able to register themselves with and transact through Designated Depository Participants (DDPs). The qualification of DDPs would be as prescribed by Sebi,” read the release.

The committee has also suggested a risk-based approach towards know your client (KYC) by categorising FPIs into three categories – low risk, medium risk and high risk with registration requirements being the most stringent for the third category. The FPIs under first two categories won’t be required to produce personal identification documents such as copy of passport, photograph and the like.

Also, the panel has recommended that FPIs belonging to the highest risk category shall not be allowed to issue offshore derivative instruments (ODI) or participatory notes.