The Securities and Exchange Board of India (SEBI) on 31 December 2018 came out with SEBI (Foreign Portfolio Investors) (Third Amendment) Regulations, 2018. The third amendment regulations have amended regulation 23(3) of the FPI Regulations to treat multiple entities having direct or indirect common ownership of more than 50% or common control as part of the same investor group. The investment limits of all such entities will be clubbed with the investment limit applicable to a single FPI.
A “government agency” has been defined as an entity in which more than 75% of ownership or control is held by the government of a foreign country. SEBI has also inserted a new provision, which states that the FPI applicant or an existing FPI and their underlying investors contributing 25% or more in the corpus of such applicant or existing FPI, or exercising control over such FPI, should not be a person mentioned under the United Nations Security Council’s sanctions list.
The person should also not be from a jurisdiction that is identified in the public statement of the Financial Action Task Force (FATF) as: (1) a jurisdiction having strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or (2) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies. The timelines for complying with the amended regulations and implications in case of breach or a temporary breach have also been prescribed under the third amendment regulations.
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