SEBI Releases Operating Guidelines For Foreign Venture Capital Investors

SEBI Releases Operating Guidelines For Foreign Venture Capital Investors

The instructions will help in a smooth transition to the amended regime and will be effective from 01 January 2025

The Securities and Exchange Board of India (SEBI) has released operational guidelines for Foreign Venture Capital Investors (FVCIs) outlining procedures for registration, compliance, and investment activities. It has also issued rules for Designated Depository Participants (DDPs).

The markets regulator has set a deadline of 31 March 2025, for existing FVCIs to engage with a DDP. Failing to do so would restrain them from making new investments.

The circular mentioned, "Any FVCI failing to engage a DDP shall not be permitted to make further investment and shall liquidate investments in listed securities, by 31 March 2026 and other investments, by 31 March 2027.”

Proceeds from these sales are required to comply with Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating Financing of Terrorism (CFT) rules.

The guidelines also mandate DDPs to conduct eligibility checks on FVCIs within six months of engagement. If an FVCI fails to meet the eligibility criteria, it should be restricted from making new investments, although it can hold or sell existing ones.

FVCIs with no holdings must surrender their registration within 30 days of the DDP's assessment.

Additionally, if any FVCI or its major investors appear on the sanctions list of the United Nations Security Council or are no longer considered ‘fit and proper’, SEBI would cease transactions involving that FVCI. The DDPs must notify such cases within seven days.

For operations to continue, FVCIs must submit complete registration applications, including the required documents and fees, to their respective DDPs.