Tightening the disclosure norms on offshore derivative instruments (ODIs), market regulator SEBI on Tuesday asked Foreign Institutional Investors FIIs to give an undertaking that these investment tools are not issued to non-resident and resident Indians, who otherwise do not need the FII route.
FIIs and their agents would have to state that "we undertake that we/our associates have not issued/subscribed/ purchased any of the ODIs directly to/from non-resident Indians/resident Indians," SEBI said in a circular.
FIIs and their agents have been allowed to issue ODIs such as participatory notes against underlying securities to those entities that are not registered with SEBI.
"The circular regarding the undertaking is nothing new as SEBI just wants to track how much money is coming from FIIs and from Indian investors separately. It is basically tightening of the norms of disclosure," said Mr D K Aggarwal, director of a domest ic brokerage SMC Global.
Now, he noted, it would be binding on the FIIs to disclose their offshore derivatives investment to the NRIs. NRIs are allowed to invest in the offshore derivatives directly, and they need not come through FII route, he added.
The matter of undertaking by FIIs that they are not issuing ODI to NRIs or resident Indians came into limelight after Securities Appellate Tribunal recently ruled against the SEBI order in the Goldman Sachs’ case.
In the Goldman Sachs case, SAT reversed the SEBI order that imposed a penalty of Rs 1 crore on a Mauritius-based arm of the investment banker for not submitting the information about issuance of ODI in a prescribed format with requisite declarations. - P TI
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