SEBI Tweaks Foreign Venture Capital Investors’ Registration Rules To Streamline Investments

Markets regulator Securities and Exchange Board of India (SEBI) has notified new regulations to streamline the framework for the registration of foreign venture capital investors (FVCIs).

As per PTI’s report, the process of granting registration to FVCIs and processing other post-registration references has been delegated to designated depository participants (DDPs) in line with provisions prescribed for FPIs (foreign portfolio investors).

An applicant seeking registration as an FVCI is required to engage a DDP to avail of its services for obtaining a registration certificate as FVCI and at all times the DDP and the custodian of the FVCI shall be the same entity, the report said.

Currently, SEBI holds the charge to process applications for granting registration to FVCIs and related due diligence.

“No person shall buy, sell or otherwise deal in securities as a foreign venture capital investor unless it has obtained a certificate granted by a designated depository participant on behalf of the Board (Sebi),” the report quoted SEBI’s notification issued on September 6.

The notification also mentioned, “a foreign venture capital investor or a global custodian acting on behalf of the foreign venture capital investor shall enter into an agreement with a designated depository participant and a custodian, before making any investment under these regulations.”

The markets regulator also made additions to the eligibility criteria for FVCI whereby Resident Indians (RIs), Non Resident Indians (NRIs), Overseas Citizen of India (OCI) can be constituent of the applicant.

This is subject to conditions, such as contribution of a single NRI/ OCI/ RI should be below 25% of the total contribution in the corpus of the applicant; the aggregate contribution by them should be below 50% of the total contribution in the corpus of the applicant; and they should not be in control of the applicant, SEBI mentioned.

This comes at a time when investors abroad are pumped by the potential of the Indian market and domestic companies are relying on pooling new capital for business expansion.

For instance, Jio Financial Services received the nod from the Department of Economic Affairs under the Ministry of Finance to raise its foreign investment cap to 49%, a few weeks ago.

In June, SEBI allowed up to 100% aggregate contribution by non-resident Indians (NRIs), Overseas Citizens of India (OCIs), Resident Indians in the corpus of FPIs that are based out of the International Financial Services Centre (IFSC).

In April, the statutory body also changed its rules related to liquidation after several limited partners approached the regulator about funds delaying fund closures beyond these extensions.