In a move to enhance the capital inflows into the country, the Securities and Exchange Board of India (SEBI) has allowed the overseas entities to use complex multi-fund structures such as multi-class share vehicle (MCV) or protected cell companies (PCCs) in order to invest in India. SEBI has noted that overseas entities can use complex multi-fund structures, if they want such models owing to the regulations in their home country and are ready to provide details of actual beneficiary of funds.
The market regulator has taken the initiative to relax the rules after representations made by the investors that necessary safeguards can be put in place against any abuse of such structures. SEBI in its circular highlighted that an FII seeking registration in India with MCV and PCCs structures would not be considered to have an 'opaque' structure if it is required by its regulator. This would be subject to certain conditions, including entities being regulated by their home jurisdiction, each fund/sub-fund of the entity satisfying broad based criteria and the entity should provide information regarding its beneficial owners as and when sought by SEBI.
Amid rising fears over the possible round-tripping or money laundering activities, SEBI, in 2010, had prohibited foreign entities using complex structures like PCCs and MTV. PCCs designed entities might comprise of various cells, having funds of various investors, in such a manner that there is legal segregation and protection of assets and liabilities for each cell.
The market regulator has taken the initiative to relax the rules after representations made by the investors that necessary safeguards can be put in place against any abuse of such structures. SEBI in its circular highlighted that an FII seeking registration in India with MCV and PCCs structures would not be considered to have an 'opaque' structure if it is required by its regulator. This would be subject to certain conditions, including entities being regulated by their home jurisdiction, each fund/sub-fund of the entity satisfying broad based criteria and the entity should provide information regarding its beneficial owners as and when sought by SEBI.
Amid rising fears over the possible round-tripping or money laundering activities, SEBI, in 2010, had prohibited foreign entities using complex structures like PCCs and MTV. PCCs designed entities might comprise of various cells, having funds of various investors, in such a manner that there is legal segregation and protection of assets and liabilities for each cell.
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