Description
SEBI settles enforcement proceedings against JP Morgan Chase Bank N.A. for violations related to FPI categorization and material change reporting obligations under FPI Regulations 2014 and 2019.
Summary
SEBI issued a settlement order (No. 8617/2025) against JP Morgan Chase Bank N.A., which filed a suo-motu settlement application under the SEBI (Settlement Proceedings) Regulations, 2018. The bank, acting as a Designated Depository Participant (DDP), sought to settle enforcement proceedings related to three violations of the FPI Regulations without admitting or denying the findings.
Key Points
- JP Morgan Chase Bank N.A. (PAN: AAACT5545N) filed a suo-motu settlement application with SEBI
- Three distinct regulatory violations were identified under FPI Regulations 2014 and 2019
- Four UK-based FPIs were incorrectly granted Category II licenses despite not being registered with the UK Financial Conduct Authority (UK-FCA)
- These same four FPIs were subsequently re-categorized as Category I without identifying their non-regulated status
- FPI-Care Super Pty Ltd. merged with FPI-Spirit Super effective November 01, 2024, constituting a Type I material change
- JP Morgan delayed advising fresh registration by 38 days (notified Nov 01, acted Dec 06, account blocked Dec 09)
- During the delay, the FPI executed 64 unauthorized purchase transactions between November 01 and December 09, 2024
Regulatory Changes
No new regulatory changes introduced. This order enforces existing provisions:
- Regulation 7(1) read with Regulation 5(b) of FPI Regulations, 2014
- Regulation 45(2)(b) read with Regulation 5(a) of FPI Regulations, 2019 and paragraph 2(v) of Part A of Operational Guidelines for FPIs & DDPs dated November 05, 2019
- Regulation 31(1)(a) of FPI Regulations, 2019 read with Clause 14(ii) of Part A of Master Circular dated May 30, 2024, as amended by SEBI Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/76 dated June 05, 2024
Compliance Requirements
- DDPs must verify that FPIs are registered with their respective home country regulators (e.g., UK-FCA) before granting any category license
- At the time of re-categorization from Category II to Category I, DDPs must re-verify regulatory status of FPIs
- Upon receipt of a Type I material change notification (such as a merger/amalgamation), DDPs must promptly reassess FPI eligibility and require fresh registration without delay
- DDPs must block FPI accounts for fresh purchases immediately upon becoming aware of a Type I material change requiring fresh registration
Important Dates
- November 01, 2024: FPI-Care Super Pty Ltd. merged with FPI-Spirit Super; material change intimated to JP Morgan Chase
- November 01 – December 09, 2024: Period during which 64 unauthorized purchase transactions were made
- December 06, 2024: JP Morgan Chase advised the surviving FPI to seek fresh registration (38-day delay)
- December 09, 2024: FPI account blocked for fresh purchases
- Settlement Number: 8617/2025
- Order Reference: SO/AS/PSD/2025-26/8617
Impact Assessment
This settlement highlights systemic compliance gaps at a major global custodian/DDP and carries significant implications for the FPI ecosystem. The 38-day delay in acting on a known Type I material change allowed 64 purchase transactions that should not have been permitted, creating potential market integrity concerns. The settlement underscores SEBI’s expectation that DDPs exercise proactive due diligence — not just at onboarding but continuously, including during FPI re-categorization and upon receiving material change notifications. Other DDPs and custodian banks should review their internal processes for verifying FPI regulatory status and handling material change events to avoid similar enforcement action.
Impact Justification
Involves a major global bank (JP Morgan Chase) acting as a Designated Depository Participant (DDP) violating FPI regulations by incorrectly categorizing FPIs not regulated by UK-FCA and failing to act timely on a Type I material change, resulting in unauthorized purchase transactions.