Having concluded its board meeting yesterday, the Securities Exchange Board of India (SEBI), among other things, is doing its bit to curb the menace of money laundering as well. Following are the key highlights:.1. P-Notes norms tightened.Offshore derivates instruments (ODIs), commonly known as P-Notes will, now have to adhere to stricter compliance norms. P-notes are instruments used by foreign portfolio investors to buy Indian stocks without registering itself with the SEBI. While initially this was done to attract foreign investment in India, it resulted in round-tripping of funds due to opaque structures of the subscribers..The changes made comes after the Supreme Court-appointed special investigation team on black money recommended further strengthening of norms to keep a tab on beneficial ownership of P-Notes..Bringing in uniformity, subscribers will now be subjected to the same Know Your Client (KYC) requirements as domestic investors instead of KYC norms of the jurisdiction of the beneficial owner.Applicability of ‘Prevention of Money-laundering’ standards. Issuer must identify subscribers who hold in excess of (i) 25% in the case of a company and; (ii) 15% in case of partnership firms/trusts/unincorporated entities.Prior permission required by subscriber to transfer ODI to another offshore investor and, all intermediate transfers during the month to be recorded and reported.Issuers required to file suspicious transaction reports with the Indian Financial Intelligence Unit (FIU) and, carry out periodical review.“The new norms are more for ensuring transparency and having checks in place while dealing with P-Notes rather than weaning out potentially abused ODIs. These additional compliance requirements would not impact the quantity of quality money that comes to India through ODIs,” said Sandeep Parekh, founder of Finsec Law Advisors.On the viability of this move, Somsekhar Sundaresan, partner at J. Sagar Associates notes,.“It is the requirement to keep track of transfers of P-Notes that could be cumbersome and impose transaction costs. One isn’t sure how many abusive P-Notes indeed get transferred. So I’m not sure if this is warranted, going by the potential benefits compared to the costs imposed”.2. Dividend distribution policy for listed companies.The top 500 listed companies must disclose the dividend distribution policies in their annual reports and rationale behind deviation, if any..3. Core Settlement Guarantee Fund (Core SGF) .Stock Exchanges are no longer required to to transfer 25% of their profit to the Core SGF..4. Consultation paper for InVIT Regulation.SEBI has approved bringing out a consultation paper for amending the SEBI (Infrastructure Investment Trusts) Regulations, 2014 to, inter alia, bring down sponsor holding from 25% to 10% and increase number of sponsors from 3 to 5..5. Simpler norms for settlement and compounding.The guidance note issued by SEBI on 3 March 2016 will now be incorporated in the Settlement Regulations. SEBI has said it will prohibit settlement through consent rules only in the case of offences that had a ‘marker-wide impact’ and hurt investors substantially as opposed to one listed security and its investors..6. SEBI Chair at National Institute of Securities Markets (NISM).The Board has also approved a proposal for setting up of two “SEBI Chairs” at the NISM, a public trust established by SEBI..The SEBI Chairs would, among other functions, provide research based policy inputs and undertake activities of publishing research papers, policy notes etc..7. Introduction of Pension Scheme.While SEBI currently doesn’t have a pension scheme in place, it offers the facility of provident fund. Following the meeting, SEBI has given its permanent employees a choice to either continue with the existing Contributory Provident Fund or to join the New Pension Scheme..You may read the outcome of the board meeting here:
Having concluded its board meeting yesterday, the Securities Exchange Board of India (SEBI), among other things, is doing its bit to curb the menace of money laundering as well. Following are the key highlights:.1. P-Notes norms tightened.Offshore derivates instruments (ODIs), commonly known as P-Notes will, now have to adhere to stricter compliance norms. P-notes are instruments used by foreign portfolio investors to buy Indian stocks without registering itself with the SEBI. While initially this was done to attract foreign investment in India, it resulted in round-tripping of funds due to opaque structures of the subscribers..The changes made comes after the Supreme Court-appointed special investigation team on black money recommended further strengthening of norms to keep a tab on beneficial ownership of P-Notes..Bringing in uniformity, subscribers will now be subjected to the same Know Your Client (KYC) requirements as domestic investors instead of KYC norms of the jurisdiction of the beneficial owner.Applicability of ‘Prevention of Money-laundering’ standards. Issuer must identify subscribers who hold in excess of (i) 25% in the case of a company and; (ii) 15% in case of partnership firms/trusts/unincorporated entities.Prior permission required by subscriber to transfer ODI to another offshore investor and, all intermediate transfers during the month to be recorded and reported.Issuers required to file suspicious transaction reports with the Indian Financial Intelligence Unit (FIU) and, carry out periodical review.“The new norms are more for ensuring transparency and having checks in place while dealing with P-Notes rather than weaning out potentially abused ODIs. These additional compliance requirements would not impact the quantity of quality money that comes to India through ODIs,” said Sandeep Parekh, founder of Finsec Law Advisors.On the viability of this move, Somsekhar Sundaresan, partner at J. Sagar Associates notes,.“It is the requirement to keep track of transfers of P-Notes that could be cumbersome and impose transaction costs. One isn’t sure how many abusive P-Notes indeed get transferred. So I’m not sure if this is warranted, going by the potential benefits compared to the costs imposed”.2. Dividend distribution policy for listed companies.The top 500 listed companies must disclose the dividend distribution policies in their annual reports and rationale behind deviation, if any..3. Core Settlement Guarantee Fund (Core SGF) .Stock Exchanges are no longer required to to transfer 25% of their profit to the Core SGF..4. Consultation paper for InVIT Regulation.SEBI has approved bringing out a consultation paper for amending the SEBI (Infrastructure Investment Trusts) Regulations, 2014 to, inter alia, bring down sponsor holding from 25% to 10% and increase number of sponsors from 3 to 5..5. Simpler norms for settlement and compounding.The guidance note issued by SEBI on 3 March 2016 will now be incorporated in the Settlement Regulations. SEBI has said it will prohibit settlement through consent rules only in the case of offences that had a ‘marker-wide impact’ and hurt investors substantially as opposed to one listed security and its investors..6. SEBI Chair at National Institute of Securities Markets (NISM).The Board has also approved a proposal for setting up of two “SEBI Chairs” at the NISM, a public trust established by SEBI..The SEBI Chairs would, among other functions, provide research based policy inputs and undertake activities of publishing research papers, policy notes etc..7. Introduction of Pension Scheme.While SEBI currently doesn’t have a pension scheme in place, it offers the facility of provident fund. Following the meeting, SEBI has given its permanent employees a choice to either continue with the existing Contributory Provident Fund or to join the New Pension Scheme..You may read the outcome of the board meeting here: