Modification in Operational Guidelines for FPIs and DDPs pursuant to amendment in SEBI (Foreign Portfolio Investors) Regulations, 2019

Last updated: 05 August 2021

Save Share

Quick Summary

The Securities and Exchange Board of India (SEBI) has modified its operational guidelines for Foreign Portfolio Investors (FPIs) and Designated Depository Participants (DDPs). These changes align with the recent amendment to the SEBI (Foreign Portfolio Investors) Regulations, 2019. The update clarifies how resident Indian fund managers can benefit from Section 9A of the Income Tax Act, 1961, and specifies that resident Indian individual contributions must be made via the Liberalised Remittance Scheme (LRS) for global funds with less than 50% Indian exposure.

Securities and Exchange Board of India

Circular

SEBI/ HO/ FPI&C/ P/ CIR/ 2021/ 609

Dated: August 04, 2021

1. Foreign Portfolio Investors (“FPIs”)
2. Custodians and Designated Depository Participants (“DDPs”)
3. The Depositories (NSDL and CDSL)

All recognized Stock Exchanges and Clearing Corporations

Dear Sir/ Madam,

Sub: Modification in Operational Guidelines for FPIs and DDPs pursuant to amendment in SEBI (Foreign Portfolio Investors) Regulations, 2019

1. Section 9A of the Income Tax Act, 1961 (IT Act) was introduced by the Finance Act 2015 and subsequently amended vide Finance Act 2020 to facilitate setting up of fund management activity in India with respect to offshore funds.

2. In order to enable Resident Indian fund managers to benefit from the provisions of Section 9A, clause (c) of Regulation 4 of the SEBI (Foreign Portfolio Investors) Regulations, 2019, has been amended vide Gazette Notification No. SEBI.LAD-NRO/GN/2021/32 dated August 03, 2021 (enclosed).

3. For operationalizing the aforementioned amendment to the SEBI (Foreign Portfolio Investors) Regulations, 2019, the Explanation provided under Para 2 (ii) (b) of Part A of the Operational Guidelines for FPIs and DDPs, issued vide circular dated November 05, 2019, stands modified as below:

“Explanation: The contribution of resident Indian individuals shall be made through the Liberalised Remittance Scheme (LRS) notified by Reserve Bank of India and shall be in global funds whose Indian exposure is less than 50%.”

4. DDPs and Custodians are requested to bring the contents of this circular to the notice of their clients.

5. This circular is issued in exercise of the powers conferred by Section 11(1) of Securities and Exchange Board of India Act, 1992.

6. A copy of this circular is available at the web page “Circulars” on our website www.sebi.gov.in.

Yours faithfully,

Amit Tandon
General Manager
Tel. No: 022-26449373
Email id: amitt@sebi.gov.in

Enclosed: Gazette Notification No. SEBI.LAD-NRO/GN/2021/32 dated August 03 ,2021

FAQ :

The circular modifies the operational guidelines for FPIs and DDPs to reflect amendments made to the SEBI (Foreign Portfolio Investors) Regulations, 2019.

The SEBI (Foreign Portfolio Investors) Regulations, 2019, have been amended, specifically clause (c) of Regulation 4.

Section 9A was introduced to facilitate fund management activities in India for offshore funds and allows resident Indian fund managers to benefit from its provisions.

Resident Indian individuals must contribute through the Liberalised Remittance Scheme (LRS) notified by the Reserve Bank of India.

The Indian exposure of global funds must be less than 50% for contributions from resident Indian individuals.

DDPs and Custodians are requested to inform their clients about the contents of this circular.