Amendments to SEBI (Foreign Venture Capital Investor) Regulations, 2000

The recent SEBI amendments bring significant changes to the Foreign Venture Capital Investor (“FVCI”) framework, aligning it more closely with the regulatory regime for Foreign Portfolio Investors (“FPIs”). Starting from January 1, 2025, FVCIs will be required to adhere to new operational and compliance structures, which involve Designated Depository Participants (“DDPs”) in key processes like registration, renewal, and compliance monitoring. The introduction of these changes reflects SEBI’s efforts to create a more streamlined regulatory environment for foreign investments in India. Here are some of the key amendments:

1. Mandatory Role of DDPs: FVCIs, similar to FPIs, will need to rely on DDPs for managing their registration and compliance processes. This change aims to reduce the regulatory burden on SEBI by placing oversight responsibilities on DDPs, ensuring a smoother, more uniform process. FVCIs are required to submit their applications for grant of certificate to DDPs with an application fee of USD 2500.The DDP, acting on behalf of SEBI, shall review the application, verify compliance with requisite conditions, and grant the registration certificate to the FVCI. Furthermore, existing FVCIs are mandated to appoint a DDP, thereby streamlining the registration and governance framework.

For existing FVCIs, it is now mandatory to renew their certificate every five years. Failure to submit the renewal fee will be treated as a voluntary surrender of the certificate by the Designated Depository Participant (DDP).

2. Enhanced Beneficial Ownership (BO) Disclosure Requirements: The amendments introduce stricter guidelines on disclosing the beneficial ownership of FVCI entities. These disclosures will help authorities monitor foreign investments in India more closely, thus promoting greater transparency in the system.

3. Appointment of Domestic Custodians: FVCIs must now appoint domestic custodians to oversee their investments within India. This adds another layer of regulatory oversight, ensuring that FVCI activities are monitored consistently in line with SEBI’s governance standards for FPIs.

These changes reflect SEBI’s broader strategy to harmonize the governance structures for foreign investments and boost confidence among investors by enhancing operational efficiency in the market.