SEBI flexes registration norms to check fund outflow

With new norms in place, market regulator hopes to restore investor confidence, attract more foreign investments

GN Bureau | September 13, 2013



Hoping to calm the frayed nerves of foreign investors, markets watchdog Securities and Exchange Board of India (Sebi) has decided to relax registration norms and do away with exhaustive paperwork. This move, however, will be applicable only for low-risk foreign investors.

Further, in order to be able to differentiate between high-risk and low-risk foreign investors making portfolio investments in India, the regulator has created three categories, it said in a circular issued Thursday night.

The lowest risk investors have been classified under category-1. These include foreign governments, foreign central banks, government agencies, sovereign wealth funds and international/multilateral organisations. It is for this group of investors that the regulator has relaxed certain know your customer (KYC) norms; they need not submit documents for financial performance and board resolutions.

Medium-risk investors that have been grouped in category II include well-regulated entities like mutual funds, insurers, investment trusts, banks, university funds and pension funds. Certain norms have been relaxed for this group as well. Finally, category III consists of high-risk investors including corporate bodies, individuals, endowments and charitable societies for who will have to comply with stricter registration norms.

In the last few months, a sudden outflow of foreign capital owing to uncertainty in the Indian markets has left the government and its institutions scrambling for measures. With the new norms in place, the regulator hopes to restore investor confidence and attract foreign funds.

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