Securities and Exchange Board of India (Sebi) has sought additional information on the structure of foreign institutional investors (FIIs) and FII sub-accounts. Those entities seeking FII or sub-account registration will have to disclose whether they are a multi-class share vehicle (MCV) or a segregated portfolio company and if they maintain segregated or common portfolio for different class of shares. An MCV is a structure where investors in each class have separate contractual agreement with regards to their liabilities. Each class has its own fund managers and follows separate investment strategies.
The move is aimed at preventing money laundering and round-tripping, besides identifying the ultimate beneficiary to whom the securities of Indian firms are issued. A Sebi circular issued on Thursday said that if an entity is structured as MCV or is maintaining a segregated portfolio for separate classes of shares, each class should ensure that they are broad-based in nature. This means each class or unit should have at least 20 investors in it. The decision comes after Sebi banned Societe General and Barclays Bank from issuing fresh offshore derivative instruments (ODI) where it concealed the name of Pluri Capital, an entity incorporated in Mauritius. Pluri was the end beneficiary in both cases, where the
ODI was issued with the shares of RComm as the underlying. While all entities seeking FII registration with effect from
April 7, 2010 have been asked to furnish these additional details, existing FIIs and sub-accounts have been given time till September 30, 2010 to disclose their structures.