INSITE-India-Feb2024

SEBI REQUIRES FATCA & CRS CERTIFICATIONS TO BE CENTRALIZED AT KYC REGISTRATION AGENCIES

Summary: The Securities and Exchange Board of India (SEBI) has issued circular  SEBI/HO/MIRSD/SECFATF/P/CIR/2024/12 dated February 20, 2024. The circular focuses on centralizing certifications for Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) at KYC Registration Agencies (KRAs). Its goal is to simplify compliance reporting and make it easier for intermediaries in the securities market to conduct business.

In Detail: Background: The circular refers to previous SEBI circulars and guidance notes from the Department of Revenue, Ministry of Finance, about the requirements for Reporting Financial Institutions (RFIs) under FATCA and CRS norms. RFIs must collect self-certifications from clients to determine tax residency.

Regulatory Requirement: Rule 114G(11)(a) of the Income Tax Rules, 1962, requires regulators to issue instructions and guidelines for RFIs on maintaining information related to FATCA and CRS.

Intermediaries’ Responsibility: Intermediaries acting as RFIs must now upload FATCA and CRS certifications obtained from clients onto KRAs' systems. This requirement starts on July 01, 2024, with a 90-day window for uploading existing certifications.

Compliance and Documentation: Intermediaries must verify the accuracy of certifications based on account opening information, ensuring compliance with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Any updates to self-certifications are necessary for any changes reported by clients.

Role of KYC Registration Agencies: KRAs are responsible for developing coordinated systems and mechanisms, in line with SEBI’s guidelines and standards, to facilitate the centralization of FATCA and CRS certifications.

Conclusion: This circular aims to improve compliance and oversight in the securities market by centralizing FATCA and CRS certifications at KYC Registration Agencies. This streamlines processes, reduces redundancies, and ensures adherence to international tax standards. This circular is expected to boost investor confidence, enhancing the integrity and transparency of India's securities markets.

Key Links: SEBI | Centralization of certifications under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) at KYC Registration Agencies (KRAs)

REVISED PRICING METHODOLOGY FOR INSTITUTIONAL PLACEMENTS OF PRIVATELY PLACED INFRASTRUCTURE INVESTMENT TRUST

Summary: The Securities and Exchange Board of India (SEBI) has released Circular 2024/10, which updates pricing guidelines for Institutional Placements of Privately Placed Infrastructure Investment Trusts (InvITs). This change is aimed at improving the ease of doing business and meeting industry needs.

This circular introduces major changes to how pricing works for institutional placements of privately placed InvITs. It aims to simplify the process by replacing the stock exchange-based pricing with Net Asset Value (NAV) based pricing, making it easier to conduct business in this sector.

In Detail: Previously, Regulation 14(4) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 ("Regulations") governed the pricing of institutional placements for InvITs. This regulation referred to pricing guidelines outlined in the SEBI Master Circular for InvITs dated July 6, 2023 ("Master Circular"). The Master Circular set a floor price based on the average of the weekly high and low closing prices of the InvIT's listed stocks over the preceding two weeks.

Now, this circular has replaced the stock-based pricing method with a NAV-based approach. This change follows recommendations from the Hybrid Securities Advisory Committee (HySAC) and aims to facilitate ease of doing business in the infrastructure sector. Effective immediately, the floor price for institutional placements of privately placed InvITs will be determined by the NAV per unit of the InvIT, calculated according to prescribed norms. This means pricing will now reflect the full valuation of all underlying assets held by InvIT, providing a more comprehensive and transparent representation of its true value.

Conclusion: This circular brings a big change to how Institutional Placements of Privately Placed InvITs are priced, meeting industry needs and improving efficiency. By switching to NAV-based pricing, SEBI shows it listens to market changes and stays flexible with regulations. Market players should quickly adjust to these new rules to follow regulations and make the most of changes in the InvIT market.

Key Links: SEBI | Revised Pricing Methodology for Institutional Placements of Privately Placed Infrastructure Investment Trust (InvIT) 

SEBI GUIDELINES FOR RETURNING OF DRAFT OFFER DOCUMENT AND ITS RESUBMISSION

Summary: The Securities and Exchange Board of India (SEBI) is responsible for regulating India's primary market. In a recent circular, SEBI underscores the importance of providing transparent and detailed information in draft offer documents. It outlines specific guidelines for submitting these documents initially and for making revisions if necessary. These rules aim to ensure that investors have access to accurate and comprehensive information before making investment decisions in the primary market.

In Detail: SEBI emphasizes the importance of following Schedule VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations). Draft offer documents need to meet specific standards, including clarity, simplicity, and consistency in disclosures. The guidelines also specify that if the draft offer documents don't meet these standards, SEBI will send them back to issuers and lead managers for revisions. key reasons for returns include unclear disclosures, presentation issues, and regulatory concerns.

SEBI requires draft offer documents to be written in plain language, avoiding technical terms and complex layouts. Risks must be clearly explained to investors, and any pending legal matters must be disclosed for transparency.

Upon return, issuers must fix the issues and consult relevant regulators before resubmitting. While there is no fee for resubmission, charges for specified changes will still apply.

Issuers must publicly announce the resubmission within two days and inform their sectoral regulator about the return and resubmission of the draft offer document.

Conclusion: SEBI's rules for sending back and revising draft offer documents are meant to make sure the primary market is transparent, clear, and follows the rules. Following these rules can boost investor trust and keep the market lively. Compliance with regulatory requirements not only protects investors’ interests but also fosters the growth and development of the securities market in India.

Key Links: SEBI | Guidelines for returning of draft offer document and its resubmission