Brief Overview:
Proposal to align the disclosure and regulatory requirements for FPIs by extending these obligations to subscribers of Offshore Derivative Instruments (ODIs), as well as to sub-funds of FPIs has been tabled for comments.
Technical Details:
Suggested Key Proposals: –
1) To make disclosure requirements directly applicable to ODI subscribers. Currently, ODIs can be issued by Category I FPIs to eligible individuals, provided they adhere to KYC norms and other conditions around reporting of suspicious transactions, periodic system reviews, investment limits, monthly ODI reporting, etc. These requirements are not applicable to ODI subscribers.
2) Revocation of authorisation to either issue ODIs with derivatives as underlying or hedging ODIs through exchange traded derivatives.
3) Permissible underlying be restricted to cash equity or debt securities or any other permissible FPI investments.
4) Issuance of ODIs required to be conducted solely through a separate, dedicated FPI registration, with no proprietary investments allowed.
Comments on the consultation paper are invited by 27th August 2024.
JC takeaway:
The new framework outlined under the consultation paper aims to address existing arbitrage issues and enhance transparency by increasing the granularity of disclosures. While this contributes to the element of transparency only time will tell if this would also affect the investments made by ODI subscribers.
For further details, please see:
SEBI | Consultation Paper on investment by Foreign Portfolio Investors
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