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Mumbai: The Securities and Exchange Board of India (Sebi) has softened its earlier restrictions on NRI
investments into the stock market.
An NRI can now hold up to 25% of a foreign fund’s assets; while collectively, their holdings should be below 50% of the corpus, the market regulator said.
NRIs can bring down their holdings in a foreign fund to these levels within two years, it said.
In its circular on April 10, Sebi had asked NRIs and foreign funds to comply by year end, sparking protests among a section of foreign investors.
The revised rules are in line with the recommendations of a committee headed by HR Khan, former deputy governor of the Reserve Bank of India.
“I feel there are some significant relaxations.
Existing funds and new funds will not have to worry about realigning their structures by December 31 2018,”said Rajesh H Gandhi, a partner at Deloitte Haskins Sells.
Gandhi said an FPI can now have 100% NRI investors for 2 years and can also be controlled by NRIs or resident Indians without any conditions.
“There will be no restrictions even beyond 2 years if the FPI invests only in Indian mutual funds.
Sebi has clarified that clubbing of investments need not be applied if two FPIs are controlled by the same person without any riders.
This will give a big sigh of relief to global fund managers which have several sub-funds managed by the same manager,” he said Sebi, in a circular on Friday evening, said Overseas Citizens of India (OCIs) or Resident Indians should not be in control of a foreign portfolio investor (FPI).
The regulator said FPIs can be controlled by investment managers owned by an NRI or OCI as long as the investment manager is regulated in its home jurisdiction and registers itself with Sebi as non-investing FPI.
Else, it should be registered with Sebi.
The regulator said FPIs are required to maintain a list of beneficial owners (Bos) and should provide this list.
“Beneficial Owners (BOs) are the natural persons who ultimately own or control an FPI and should be identified,” the regulator said in a circular on Friday.
Tejesh Chitlangi, senior partner at law firm IC Universal Legal, said the new Sebi circular broadly addresses the concerns but a few continue to remain unaddressed.
“The ‘high risk jurisdiction’ classification is very widely defined by Sebi and continue to remain vague.
Also, in what situation a Senior Managing Official of an FPI can get classified as a Beneficial Owner, appears to be unclear,” said Chitlangi.
