Conditions
for issuance of Offshore Derivative Instruments under SEBI (Foreign Portfolio Investor) Regulations, 2014.
1. It has been decided to
align the
applicable
eligibility
and
investment
norms between Foreign Portfolio Investor (FPI) regime and subscription through the Offshore Derivative Instruments (ODI) route. Accordingly, it is clarified as under.
2. An FPI shall
issue ODIs only to
those subscribers which meet the
eligibility criteria as laid
down in Regulation
4 of the SEBI (Foreign
Portfolio
Investor) Regulations, 2014.
Regulation
4
requires
that
an FPI applicant shall
not
be granted registration unless it satisfies
inter alia the following conditions namely:
a. the applicant is
resident of a country whose securities market regulator is a signatory
to International Organization
of
Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding
with the Board;
b. the applicant being a bank, is a resident of a country whose central bank is
a member of Bank for International Settlements;
c. the applicant is not resident in a country identified in the public statement of Financial Action Task Force as:
i. a jurisdiction having
a
strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which
counter measures apply; or
ii. a jurisdiction that has not made sufficient progress in addressing
the deficiencies or has not committed to an action plan developed
with the Financial Action Task Force to address the deficiencies;
3. An FPI shall issue ODIs only to those subscribers
which do not have opaque structure(s),
as
defined under Explanation 1
of Regulation 32(1)(f) of SEBI (Foreign Portfolio Investors) Regulations, 2014.
4. Regulation 21(7) of
SEBI (Foreign
Portfolio
Investor) Regulations, 2014,
lays down the investment restrictions which are applicable to FPIs. It is clarified that:
a. These investment restrictions shall apply to ODI subscribers also. For this purpose, two or more ODI subscribers having common Beneficial Owner
(BO) shall be considered together as a single ODI subscriber, in the same manner as is being done in the case of FPIs.
b. Further, where
an investor
has investments
as
FPI
and
also holds
positions as an ODI subscriber, these investment restrictions shall apply on the aggregate of FPI investments
and ODI positions
held in the underlying Indian Company.
In other words, the investment as FPI and positions held as
ODI subscriber will be clubbed together with reference to the said investment restrictions.
5. FPIs
which issue ODIs shall put
in
place
necessary systems to
ensure compliance with above provisions as mentioned in paragraph 2, 3 and 4.
6. Existing ODI positions, if they are not in accordance with paragraph 2, 3 and 4, may continue till the expiry of the ODI contract. No additional issuances/renewal/rollover
of such positions shall be permitted. Fresh issuance of ODIs shall be made only to the eligible subscribers subject to the compliance
with paragraph 5
of this circular and with SEBI (Foreign Portfolio Investors)
Regulations, 2014 and other applicable norms.
7. This circular shall come into effect immediately.
This circular is issued in exercise of powers conferred
under SEBI Section 11 (1) of the Securities and Exchange Board of India Act, 1992.
8. A copy of this circular is available at the web page “Circulars” on our website www.sebi.gov.in. The custodian of securities are requested to bring the contents of this circular to the notice of their FPI clients.
