New Delhi, Nov. 11 -- BNP Paribas, as a designated depository participant (DDP), has settled with the Securities and Exchange Board of India (SEBI) allegations of having violated Foreign Portfolio Investor (FPI) Regulations.

DDPs are intermediaries authorised by the regulator to do due diligence as per FPI Regulations and grant certificate of registration to these foreign investors.

BNP Paribas paid around Rs 39.97 lakh (around $45,100) to settle the allegations, according to SEBI's settlement order.

According to the order, SEBI had sent a show-cause notice to BNP Paribas alleging various violations including granting Category II licence to six FPIs who were not eligible to be registered in that category and failing to identify that six FPIs were not regulated by the UK's Financial Conduct Authority at the time of conversion and incorrectly re-categorising six FPIs as Category I FPI.

The notice, dated February 25, 2025, also recorded a third allegation of granting a Category I registration to an FPI, whose name was masked in the settlement order.

Category I FPIs include central banks, sovereign wealth funds, international or multilateral organisations or agencies, and pension funds. Category II FPIs are those that are not eligible to be Category I funds, and include regulated broad-based funds, endowments, and charitable societies. The first category of FPIs are considered low-risk and are allowed to take relatively higher derivatives position limits. The second category of investors are considered moderate risk by the regulator and are allowed to take relatively lower derivative positions, according to an explainer issued by the National Stock Exchange (NSE).

BNP Paribas had submitted an application with a settlement amount of Rs 39.97 lakh and had also requested for consideration of a modified settlement amount of Rs 29.25 lakh "on certain grounds". SEBI's settlement order said that the regulator's internal committee noted that BNP Paribas' submission, for consideration of the modified amount, was "in the nature of going into the merits of the case" and therefore these submissions were not considered.

On October 27, BNP Paribas informed the regulator about the remittance of the settlement amount and subsequently adjudication proceedings against the entity were disposed of.

Published by HT Digital Content Services with permission from VC Circle.