JP Morgan Chase Settles Case With Sebi Over FPI Rule Violations

JP Morgan Chase has settled a case with the Securities and Exchange Board of India (Sebi) over alleged violations of foreign portfolio investor (FPIs) norms. The bank has agreed to pay the regulator Rs. 34.42 lakh as a settlement fee for the case.

The settlement order on March 20 came after JP Morgan had filed a suo motu application for settlement with Sebi, where the bank wished to resolve the case without admitting or denying the allegations. Sebi had flagged several violations of FPI compliance and disclosure measures by the bank.

Sebi, in the order, said that the bank had three broader compliance failures. According to the market regulator, JP Morgan Chase, acting as a designated depository participant (DDP), granted II license to four FPIs from the UK that did not have proper registration in India. These FPIs were not registered with the Financial Conduct Authority (FCA), and thus the banks granting those licenses were in violation of market norms. Further, the bank re-categorised these FPIs as Category I FPIs after the FPI Regulations were introduced in 2019, without proper verification of their regulatory status, thereby breaching eligibility norms and operational guidelines, Sebi said.

Sebi said that the bank had also failed to promptly act in a case involving the merger of an FPI entity. The bank, as the DDP, did not promptly act on material changes to the FPI. Sebi noted that the bank delayed advising fresh registration was needed in case FPI entities merge, and allowed transactions to continue for 38 days. During this period, the FPI had already undertaken 64 purchase transactions due to failure on the part of the bank, Sebi said.

Sebi said that the delay in announcing and acting on material changes to FPIs was in violation of FPI norms by the bank acting as a DDP. Sebi’s High Powered Advisory Committee and a panel of whole-time members approved the terms of settlement proposed by the bank, and ordered the bank to pay Rs. 34.42 lakh as settlement.

“... In terms of the Settlement Regulations, it is hereby ordered that any proceedings that may be initiated for the violations are settled in respect of the applicant (JP Morgan Chase Bank N A),” SEBI’s Whole Time Members Kamlesh C Varshney and Amarjeet Singh said in the order.