Markets regulator implements amendments to FPI access norms

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The Securities and Exchange Board of India (SEBI) on 15 February notified certain amendments to the SEBI (Foreign Portfolio Investors) Regulations, 2014, by way of a circular, which effected several reforms to facilitate participation of foreign portfolio investors (FPIs) in the country’s capital markets. Some of the important changes introduced are as follows:

Simplification of procedure for change in local custodian. FPIs will not need the prior consent of SEBI to change local custodians and designated depository participants (DDPs). The amendment recognizes that registered FPIs access the Indian securities market through global custodians. In such a scenario, the FPI appoints the global custodian, which in turn appoints a local/sub-custodian in India. Operationally, the global custodian represents all its FPI clients and engages with the local custodian. Having regard to this, SEBI has decided to permit a change in local custodian without its prior consent. The new local custodian/DDP must be permitted to rely on a letter issued by the global custodian regarding the change in local custodian of its FPI clients. However, the transferor local custodian/DDP will need to provide a no objection certificate to the transferee local custodian/DDP for change of local custodian.

Free of cost transfer of assets. Free of cost (FOC) transfer of assets was permitted for FPIs under the erstwhile position, in situations where the transferor and transferee FPIs have exactly the same beneficial owners. However, any such requests for an FOC transfer of assets by the FPI along with list of securities intended to be transferred, were required to be forwarded by DDPs to SEBI for approval.

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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.

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