The Securities and Exchange Board of India (SEBI) is implementing stricter oversight of international financial firms operating in India's $5 trillion stock market. According to recent reports, SEBI has accused a Mauritius-based JPMorgan unit of executing manipulative stock trades, marking a significant escalation in regulatory action against global financial institutions. This follows SEBI's most dramatic action last year when it accused Jane Street of market manipulation, an allegation that the US financial giant has denied. The regulatory body is now demanding accountability similar to US and European counterparts, representing a sharp contrast with earlier decades when foreign securities firms were rarely penalised in India. "Sebi's message is unambiguous: scale, reputation and global standing offer no shelter from India's market-conduct rules," said Pradyun Chakravarty, a partner at New Delhi law firm King Stubb & Kasiva.
According to the Association of Mutual Funds in India (AMFI), a Non-Resident Indian (NRI) can be named as a nominee for an investor's financial assets. The regulatory framework supports this arrangement, with Section 45ZA of the Banking Regulation Act, 1949, Section 72 of the Companies Act, 2013, and the SEBI (Depositories and Participants) Regulations not prohibiting the nomination of an NRI. However, the process may require additional documentation, KYC requirements, and compliance with foreign exchange regulations depending on the type of asset. This regulatory framework now extends to global financial institutions operating in India, with SEBI signalling internally that it is getting more proactive in examining transactions by domestic and international traders as part of efforts to protect retail investors.
As reported by Zee News, being a nominee does not automatically make a person the legal heir of the financial assets after the owner passes away. A nominee acts as a custodian until the assets are transferred to the actual heir. The nominee receives the financial assets of the deceased and distributes them to the legal heirs, or may hold them until the legal heir is determined. Ownership does not automatically pass to the nominee - the nominee merely manages the assets until proper inheritance procedures are completed. This nominee structure is now being scrutinized alongside global financial institutions' operations, with regulators examining how international firms handle asset distribution and compliance in India.
When the nominee is also the legal heir of the assets, they may repatriate the inherited assets abroad, subject to the rules under the Foreign Exchange Management Act (FEMA). The remittance of inherited investments by an NRI is capped at $1 million per financial year through an NRO account and an Authorised Dealer Category-I bank. Banks generally require the death certificate of the investor, inheritance documents, PAN, KYC documents, and documents indicating tax compliance, subject to FEMA requirements. Repatriation beyond the mentioned limit is still possible with the RBI's approval. This framework applies to both domestic and international financial institutions operating in India, with global firms now required to comply with these remittance limits and foreign exchange regulations.
According to the report, depending on whether the remittance is taxable and on the amount and nature of the transaction, a person may need to submit Form 15CA, including Part D for non-taxable remittances, Form 15CB, or a certificate from the Assessing Officer. An investor may choose to avoid appointing a nominee by submitting a declaration in some cases, and nominating someone once does not bind the investor to retain the same nominee throughout. For mutual funds, the nominee can be updated by submitting a request through the investment platform, while for stocks, the investor can log in to the stock broker's portal and fill in the nomination details online. Many firms are now scrambling to upgrade their local compliance levels in India as regulatory scrutiny intensifies, with global banks and traders chasing profits in what is one of the world's fastest-growing economies.
