Market regulator SEBI has clarified that those foreign institutional investors (FIIs) who are required by their parent regulator to ring-fence their assets and liabilities from other funds/ sub-funds would not be considered opaque structures, such as protected cell companies (PCC), multi class share vehicles (MCV) or equivalent.
The clarification follows representations received by SEBI in this regard.
This, however, is subject to the conditions that the FII is a regulated entity in its home jurisdiction; each fund/ sub-fund of the FII is broad-based and the FII undertakes to provide information on its beneficial owners as and when sought by SEBI.
Custodians have been directed by SEBI to inform their FII clients of the development.
On April 15, 2010, SEBI had directed FIIs and sub-accounts, which were MCVs or an equivalent structure, to give an undertaking that they would have broad-based portfolios. Any change in structure/ constitution/ addition of share classes would require SEBI approval, the circular had said.
Companies having multiple classes of common stock issue two classes, usually denoted as Class A and Class B shares. The common practice is to assign more voting rights to one class of stock over the other (MCV).
A PCC is one which segregates the assets and liabilities of different classes (or sometimes series) of shares from each other and from the general assets of the PCC.