Sebi allows off-market transfer of funds by FPIs to IFSC
07 June 2021
The Securities and Exchange Board of India (Sebi) has allowed off-market transfer of securities by foreign funds, making it easier for foreign funds to relocate to the International Financial Services Centre (IFSC) in Gujarat.
At present, Sebi regulations do not allow the cashless transfer of securities between foreign portfolio investors (FPIs) with different permanent account numbers.
“It has been decided that an FPI (‘original fund’ or its wholly-owned special purpose vehicle) may approach its DDP (designated depository participant) for approval of a one-time ‘off-market’ transfer of its securities to the ‘resultant fund’. The DDP, after appropriate due diligence, may accord its approval for a one-time ‘off-market’ transfer of securities for such relocation,” Sebi said on Tuesday.
Foreign funds that are registered with Sebi as an FPI and propose to relocate to IFSC need a fresh FPI licence. Additionally they need to transfer the securities from their old demat account to the new account, which is tagged to IFSC FPI.
At present, FPIs have to carry out transfer of securities by selling from the old demat account on the exchange and buy securities in the new demat account. This is so irrespective of merger of account or relocation.
However, ‘off-market’ transfers of securities are allowed in case of multi investment management structure, where beneficial owners are the same and they have a common PAN.
An amendment to the Finance Bill earlier this year had allowed a wholly-owned special purpose vehicle (SPV) of an offshore fund to transfer securities to an IFSC fund (resultant fund) in Gujarat, while also enabling the IFSC fund to issue units either to the investors in the offshore fund or to the offshore fund itself.
This was to give much-needed flexibility to the fund manager to either shift the entire fund structure to the IFSC or to adopt a master-feeder structure.