Description

SEBI settlement order against Sixteenth Street Asian GEMS Fund for violations related to OCI control restrictions, unauthorized securities transactions, and incorrect beneficial owner declarations under FPI Regulations 2019.

Summary

SEBI issued a settlement order (SO/AS/PSD/2025-26/8660) against Sixteenth Street Asian GEMS Fund (PAN: AAZCS3903L), a Foreign Portfolio Investor, for multiple violations of the SEBI (Foreign Portfolio Investors) Regulations, 2019. The applicant filed a suo-motu settlement application proposing to settle enforcement proceedings without admitting or denying the findings.

Key Points

  • Sixteenth Street Asian GEMS Fund was controlled by an Overseas Citizen of India (OCI) from December 31, 2020 to August 8, 2025, violating Regulation 4(c)(iv) of the FPI Regulations 2019
  • While under OCI control, the fund made fresh purchases and sales of securities from January 1, 2021 to August 7, 2025, in violation of FPI Regulations
  • The fund’s beneficial owner received an OCI card on September 9, 2019, but the fund only informed its Designated Depository Participant (DDP) on July 29, 2025 — a delay of nearly six years
  • The applicant made an incorrect beneficial owner declaration dated June 24, 2022, falsely stating no OCI exercised control over the fund
  • The fund had earlier declared in June 2018 that no OCI held control, which became inaccurate after September 2019
  • Settlement terms were revised by the applicant via letter dated December 29, 2025, after an Internal Committee meeting on December 18, 2025

Regulatory Changes

No new regulatory changes introduced. This order applies existing provisions:

  • Regulation 4(c)(iv) of the FPI Regulations, 2019 (OCI control restrictions)
  • Regulations 22(1)(b) and 22(1)(c) of the FPI Regulations, 2019 (disclosure obligations)
  • Regulation 23 of the FPI Regulations, 2019 (Code of Conduct)
  • SEBI Master Circular for FPIs dated May 30, 2024 (clauses 1(ii)(c), 1(ii)(e), 14(i))
  • SEBI Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/76 dated June 5, 2024

Compliance Requirements

  • FPIs must ensure they are not controlled by OCIs as per Regulation 4(c)(iv) of FPI Regulations, 2019
  • Any change in beneficial ownership status (e.g., acquisition of OCI status) must be promptly reported to the DDP
  • Beneficial owner declarations must be accurate and updated; false declarations constitute a Code of Conduct violation
  • FPIs under OCI control must not make fresh purchases or sales of securities

Important Dates

  • June 18, 2018: Original beneficial owner declaration by the applicant (stated no OCI control)
  • September 9, 2019: Beneficial owner received OCI card (triggering disclosure obligation)
  • December 31, 2020: OCI began exercising control over the fund
  • January 1, 2021 – August 7, 2025: Period of unauthorized securities transactions
  • June 24, 2022: Incorrect beneficial owner declaration filed
  • July 29, 2025: Fund informed DDP of OCI control (belated disclosure)
  • August 8, 2025: OCI control ceased
  • December 18, 2025: Internal Committee meeting with applicant’s representatives
  • December 29, 2025: Applicant filed revised settlement terms

Impact Assessment

This settlement has limited direct market impact as it concerns a single foreign portfolio investor. However, it carries significant compliance signaling value for the FPI community:

  • Reinforces that OCI-controlled entities cannot hold FPI registrations or trade securities
  • Highlights SEBI’s scrutiny of beneficial ownership declarations and the obligation to update DDPs promptly upon any change in OCI/NRI status of beneficial owners
  • Demonstrates SEBI’s use of settlement proceedings to resolve historical violations without full enforcement action
  • Sets a precedent for self-reporting and suo-motu settlement as a compliance tool for FPIs with legacy violations

Impact Justification

Enforcement settlement involving a foreign portfolio investor for multiple FPI regulatory violations including OCI control restrictions and incorrect disclosures; limited direct market impact but significant compliance precedent for FPIs.