SEBI, the securities market regulator in India, has issued a circular on January 25, 2024, to streamline the reporting requirements for designated depository participants (DDPs) and custodians of securities. The circular aims to have uniform compliance standards, ease of compliance reporting and better regulatory oversight.
What are DDPs and custodians?
DDPs are entities that are authorized by SEBI to act as intermediaries between foreign portfolio investors (FPIs) and the Indian securities market. They perform various functions such as registration, compliance, monitoring and reporting of FPIs. Custodians are entities that hold the securities of FPIs in dematerialized form and provide various services such as settlement, corporate actions, reporting and reconciliation.
What are the new reporting requirements?
SEBI has reviewed various reports submitted by the DDPs and custodians and has provided the reporting requirements along with periodicity in the circular. Some of the reports are:
- FPIs non-compliant with legal entity identifier (LEI) requirements: LEI is a unique 20-digit alphanumeric code that identifies legal entities participating in financial transactions. SEBI has mandated that all FPIs should obtain LEI by June 30, 2021. DDPs and custodians should report the FPIs who have not obtained LEI on a quarterly basis.
- FPIs who have not submitted granular beneficial ownership (BO) details: BO is the natural person or persons who ultimately own or control an FPI. SEBI has prescribed certain thresholds for identifying the BO of an FPI based on ownership or control. DDPs and custodians should report the FPIs who have not submitted the BO details as per the prescribed format on a quarterly basis.
- FPI registration details: DDPs should report the details of FPI registration such as category, sub-category, country of incorporation, date of registration, validity period, etc. on a monthly basis.
- FPI investment details: Custodians should report the details of FPI investment such as asset class, instrument type, sector, issuer name, ISIN, quantity, value, etc. on a monthly basis.
- FPI breaches: DDPs and custodians should report any breaches by FPIs of the investment limits or other regulatory norms on a monthly basis.
The monthly and quarterly reports should be uploaded within 15 calendar days from the end of each month and quarter, respectively. The half-yearly and annual reports should be uploaded within 30 calendar days from the end of each half-year and year, respectively. The reports should be submitted through the SEBI intermediary portal.
What are the implications of the new reporting requirements?
The new reporting requirements are expected to improve the transparency and accountability of FPIs and their intermediaries. They will also help SEBI to monitor the compliance of FPIs with the applicable regulations and take appropriate actions in case of any violations. The new reporting requirements will also facilitate data analysis and policy formulation by SEBI.