Regulation 32 - Obligations and responsibilities of designated depository participants - Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

CHAPTER VI GENERAL OBLIGATIONS AND RESPONSIBILITIES OF DESIGNATED DEPOSITORY PARTICIPANTS Obligations and responsibilities of designated depository participants. 32. (1) All designated depository participants who have been granted approval by the Board shall - (a) comply with the provisions of these regulations, as far as they may apply, circulars issued thereunder and any other terms and conditions specified by the Board from time to time; (b) forthwith inform the Board in writing, if any information or particulars previously submitted to the Board are found to be false or misleading, in any material respect; (c) forthwith inform the Board in writing, if there is any material change in the information previously furnished by him to the Board; (d) furnish such information, record or documents to the Board and Reserve Bank of India, as may be required, in relation to his activities as a designated depository participant; (e) ensure that only registered foreign portfolio investors are allowed to invest in securities market; (f) ensure that foreign portfolio investor does not have opaque structure(s): 3 [Explanation 1. - For the purposes of this clause, opaque structure shall mean any structure such as (i) protected cell company, segregated cell company or equivalent, where the details of the ultimate beneficial owners are not accessible or where the beneficial owners are ring fenced from each other or where the beneficial owners are ring fenced with regard to enforcement, or (ii) where applicant or its investor(s) identified on basis of threshold for identification of beneficial owner have issued any bearer shares or maintain any outstanding bearer shares. Provided that the foreign portfolio investor satisfying the following criteria shall not be treated as having opaque structure: (i) the applicant is regulated in its home jurisdiction; (ii) each fund or sub fund in the applicant satisfies broad based criteria; (iii) the applicant gives an undertaking to provide information regarding its beneficial owners as and when Board seeks this information; and (iv) the applicant submits an undertaking that it does not maintain any outstanding bearer shares and it would not issue bearer shares in future. Explanation 2. - The phrase ultimate beneficial owner shall have the same meaning assigned to the term beneficial owner as defined under the Prevention of Money Laundering Act, 2002. ] (g) have adequate systems to ensure that in case of jointly held depository accounts, each of the joint holders meet the requirements specified for foreign portfolio investors and shall perform KYC due diligence for each of the joint holders; (h) in case of any penalty, pending litigations or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by any regulator against a designated depository participant, the designated depository participant shall bring such information forthwith, to the attention of the Board, depositories and stock exchanges; (i) be guided by the relevant circular on Anti-Money Laundering or Combating the Financing of Terrorism specified by the Board from time to time. (2) The designated depository participant engaged by an applicant seeking registration as foreign portfolio investor shall:-- (a) ascertain at the time of granting registration and whenever applicable, whether the applicant forms part of any investor group; (b) open a dematerialized account for the applicant only after ensuring compliance with all the requirements under Prevention of Money Laundering Act, 2002 and rules and regulations prescribed thereunder, Financial Action Task Force standards and circulars issued by the Board in this regard, from time to time and shall also ensure that foreign portfolio investors comply with all these requirements on an ongoing basis; (c) carry out necessary due diligence and obtain appropriate declarations and undertakings from applicant to ensure that no other depository account is held by any of the concerned applicant as a foreign portfolio investor or as a non resident Indian, before opening a depository account; (d) ensure that 2 [ the securities ] held by foreign portfolio investors are free from all encumbrances: 1 [Explanation. - An encumbrance created to meet any statutory and regulatory requirements shall not be considered under this clause.] (e) collect and remit fees to the Board, in the manner as specified in Part A of Second Schedule; and (f) in case of change in structure or constitution or direct or indirect change in 4 [ common ownership or control ] reported by the foreign portfolio investor, re-assess the eligibility of such foreign portfolio investor. ***************** NOTES:- 1 Inserted by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2018, w.e.f. 05-04-2018. 2. Substituted vide Notification No. SEBI/LAD-NRO/GN/2018/08 dated 27-04-2018 before it was read as, equity shares 3. Substituted vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 before it was read as, Explanation 1.- For the purposes of this clause, opaque structure shall mean any structure such as protected cell company, segregated cell company or equivalent, where the details of the ultimate beneficial owners are not accessible or where the beneficial owners are ring fenced from each other or where the beneficial owners are ring fenced with regard to enforcement: Provided that the foreign portfolio investor satisfying the following criteria shall not be treated as having opaque structure: (i) the applicant is regulated in its home jurisdiction (ii) each fund or sub fund in the applicant satisfies broad based criteria, and (iii) the applicant gives an undertaking to provide information regarding its beneficial owners as and when Board seeks this information. Explanation 2.- For the purposes of Explanation 1, the definition of ultimate beneficial owner shall be as provided under the Master circular on Anti Money Laundering Standards or Combating the Financing of Terrorism, issued by the Board from time to time. 4. Substituted vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 before it was read as, beneficial ownership