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Overall feedback on new FPI regulations positive: Nishith Desai Associates

Updated : September 27, 2019 06:56:19 IST

After the Securities and Exchange Board of India (Sebi) simplified Know Your Customer (KYC) requirements for foreign portfolio investors (FPIs) and permitted them to carry out the off-market transfer of securities, Nishith Desai Associates on Friday termed the move by the regulator as positive.

In an interview to CNBC-TV18, Richie Sancheti, head of investment funds, said that FPI regulations impact the market and that is the reason the government is sensitive to the regulatory frameworks.

Sancheti said fund managers on the FPI side have never been shy of expressing their anguish if there is a misstep from the government, "The regulator seems to have done a fair job of translating a lot of the feedback that they have been getting from the industry."

"However, we will have to wait until Sebi comes out with operating guidelines. If they are going to look at the new category 2 investors like institutional investors or are they going to relegated them to the non-institutional class," he said.

Talking on investors from Mauritius or Cayman, Sancheti said, "Here we have to look at the operating guidelines, which Sebi would be publishing today. However, one thing that is clear from regulation is that category 2 FPIs would not be allowed to either issue or subscribe to Outward Direct Investment (ODIs) or P-Notes and this is something where a lot of Cayman-based funds were subscribing to ODIs."

"Now the universe of eligible subscribers would shrink drastically especially when Cayman and Mauritius are completely ruled out of category 1 eligibility norms,” he said, adding that the only saving grace is if some of these funds are managed by the US or any other FATF member country, wherein they could qualify as category 1 FPI.
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