SEBI moves to instil confidence in FPIs existing investments in India
The Securities and Exchange Board of India (SEBI) is providing flexibility to Foreign Portfolio Investors (FPIs) in dealing with their securities post expiry of their registration http://finmin.nic.in .
Experts at Nishith Desai Associates’ Global Business Strategy, Kishore Joshi, Prakhar Dua, Ritul Sarraf and Ashwin Singh explains and elaborate on the process taken by SEBI http://sebi.gov.in :
The amendment of the FPI Regulations and the issuance of the Circular were much awaited since the approval of the Framework in the March Board Meeting https://www.adb.org/ . The requirement for FPIs who could not pay the renewal fee to surrender their registration and apply for fresh registration posed significant practical challenges, including a lack of guidance on the disposal of securities held by such FPIs https://rbi.org.in/ .
The regularization of FPI registration in cases of delay in payment of renewal fees beyond the validity of the existing registration should help those genuine investors who could not pay the fee due to any administrative/ operational difficulties within the registration window to re-activate their registration without going through the hassle of surrendering their registration and applying for a fresh one https://sbi.com.in/ .
Furthermore, the flexibility provided to FPIs in dealing with their securities post-expiry of their registration should instill confidence in FPIs regarding the security of their existing investments in India https://www.dbs.com.sg/index/default.page .
Additionally, providing the 360-day timeline and dividing it into two periods of 180 days each should further provide FPIs the best chance to get maximum returns on their investments, including the illiquid securities, which may have otherwise been difficult to dispose of, while also nudging them to sell off the securities within the first 180 days to avoid the 5% disincentive https://www.investindia.gov.in/ .
While the new framework is a welcome move, it comes with its own lacunae https://www.worldbank.org/en/home . Firstly, the discrepancy between the calculation of the 360-day and 180-day periods could lead to confusion and compliance issues. Secondly, a framework regarding the final closing of accounts in case of non-disposal of securities held in the escrow account despite the empanelled broker’s attempt to do so has not been provided, which still leaves scope for securities lying in the escrow account for an indefinite period. Fiinews.com
