SEBI has harmonised the KYC and registration requirements of foreign venture capital investors (FVCI) with that of foreign portfolio investors (FPIs).

The regulator has delegated the registration powers to custodian banks similar to that for FPIs. Earlier, registration applications were sent to SEBI directly, which reviewed and gave the registration. This took time because of limited SEBI officers, said experts.

“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,” a notification put out by the regulator said.

Welcome move

The custodian has to monitor investment of foreign venture capital investors in India; furnish periodic reports to the regulator and ensure that a foreign venture capital investor does not make any new investment or sell its existing investment until renewal fee is paid. “This is a welcome move by SEBI to bring parity with the FPI regime around KYC and other requirements and also decentralise the registration requirements by granting DDPs the power to review and grant registrations,” said Divaspati Singh, Partner, Khaitan & Co.

Singh believes this will make the FVCI registration process much smoother and clearer and will also aid in the inflow of foreign capital in start-ups and certain crucial sectors.

The FVCI applicant has to be an entity incorporated outside India or in an International Financial Services Centre. It has to be a resident of a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s multilateral or bilateral memorandum of understanding. In the case of a bank, its central bank has to be a member of Bank for International Settlements.

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