Pursuant to SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/155 dated December 16, 2019 (read here) , a list of specified Foreign Portfolio Investors (FPIs) to which the Asset Management Companies (AMCs) could provide management and advisory services, as prescribed under Regulation 24(b) of SEBI (Mutual Funds) Regulations , 1996 (“SEBI Mutual Funds Regulations”). Regulation 24(b) of the SEBI Mutual Funds Regulations provides for restrictions on the business activities undertaken by the AMCs. The restrictions include not acting as a trustee of any mutual fund, and not undertaking any business activities other than in the nature of management and advisory services provided to pooled assets.
However, in consultation with the International Financial Services Centres Authority (IFSCA), the SEBI has concluded that the AMCs may provide management and advisory services to Foreign Portfolio Investors operating from IFSC and regulated by IFSCA. However, such FPIs shall not fall under the categories of FPIs enlisted in SEBI Circular dated December 16, 2019. The categories exempted from the ambit are (i) government and related investors, sovereign wealth funds, international or multilateral organisations or agencies including entities controlled or at least 75% directly or indirectly owned by such government and government related investors; (ii) regulated entities such as pension funds, insurance or reinsurance entities, banks and mutual funds; and (iii) regulated FPIs wherein the aforementioned (i) and (ii) hold more than 50% of shares/units.
Further, such FPIs operating from IFSC and regulated by IFSCA shall be allowed to invest in mutual fund schemes, excluding schemes falling under the category of ‘thematic’. Thematic has been defined as an open-ended equity scheme, wherein the minimum investment in equity and equity related instruments of a particular sector/particular theme of 80% of total assets. Furthermore, such FPIs shall not take contra-position in relation to investment in equity and equity derivative securities listed on recognised stock exchanges in India, for a period of 6 months from the date of purchase or sale of such securities.
Please find a copy of the circular, here.
This update has been contributed by Jitendra Soni (Partner), Smriti Tripathi (Senior Associate) and Esha Dinesh (Associate)
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