India: FPI body hits out at Sebi circular

  • In a rare display of defiance, a lobby of institutional investors and a top law firm advising it have openly attacked market regulator Sebi’s decision to curb investments by non-resident Indians (NRIs) and offshore vehicles of Indian companies – describing the new rules as “racial discrimination” that could spark a selloff in stocks.
  • According to an Apr 18 directive of Sebi, NRIs, persons of Indian origin (PIOs) and overseas vehicles set up by Indian financial services groups cannot be ‘beneficial owners’ of foreign portfolio investors (FPIs).
  • “We understand the government’s concern over round-tripping. FPIs have no objection in disclosing who the beneficial owners are. But why restrict investments?” said Nishith Desai, founder of law firm Nishith Desai Associates.
  • Lobby group Asset Management Roundtable of India or Amri on 3 Sep 18 said the immediate impact of the new Sebi norms, if not amended, will be that USD75bn investment managed by overseas citizens of India (OCIs), persons of Indian origin (PIOs) and non-resident Indians (NRIs) will be disqualified from investing in India, and the funds will have to be withdrawn and liquidated within a short time frame.
  • In response, the Securities and Exchange Board of India (Sebi) on 4 Sep 18 defended its stance on new rules for foreign portfolio investors (FPIs), saying warnings of a capital flight were “preposterous” and “highly irresponsible.”
  • FPIs were told to disclose Beneficial Owners (BO) if the BO is a company with 25% or more controlling ownership, and 15% if the BO holds stake through a partnership in the company acting as the FPI.
  • The threshold was stricter at 10% for “high-risk” nations with a history of money-laundering, terrorism and so on. Sebi’s 10 Apr 18 rules were framed in line with anti-money laundering norms.
  • FPIs own securities worth at least USD425bn in Indian equities. Of this, NRIs have invested an around USD75bn through India-focused funds in which majority owners are FPIs.
  • Sebi added on 21 Aug 18 that existing FPIs will be provided a time-frame of six months to comply with the requirements stipulated therein right up till 31 Dec 18.

External Link: https://economictimes.indiatimes.com/markets/stocks/news/fpi-body-hits-out-at-sebi-circular/articleshow/65664640.cms

External Link: https://www.livemint.com/Money/3uN7MNcTtvIgB8cIKD5YPJ/Sebi-defends-stance-on-new-rules-for-FPIs.html

External Link: https://www.ft.com/content/e0370480-b041-11e8-8d14-6f049d06439c

4-Sep-2018


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