SEBI Issues Guidelines Concerning the Surrender of FPI Registration

The Securities and Exchange Board of India (SEBI), on 30.03.2021, has passed a Circular relating to the Guidelines concerning the Surrender of FPI Registration, vide circular no SEBI/ HO/ IMD/ FPI&C/ CIR/ P/ 2021/ 045.

Further, the said circular will come into force with immediate effect and is issued under the ambit of the powers provided by section 11 (1) of the SEBI Act 1992.

In this article, the key points of consideration will be the concept of SEBI and Foreign Portfolio Investment, together with the guidelines concerning the Surrender of FPI Registration.

Concept of SEBI

The term SEBI stands for the Securities and Exchange Board of India. It is the apex market regulator in India and was formed in April 1992, under the ambit of SEBI Act 1992^[1].

Further, SEBI has wide-ranging regulatory, enforcement, and investigative powers, comprising of the ability to levy fines and penalties on violators.

Concept of Foreign Portfolio Investment

The term FPI or Foreign Portfolio Investment means an investment by the non-residents in Indian securities, comprising of shares, corporate bonds, government bonds, units of business trusts, convertible securities, etc.

Further, it shall be noted that the class of investors who invest in these securities are known as Foreign Portfolio Investors.

Moreover, the laws governing the Foreign Portfolio Investment in India are as follows:

1. Securities and Exchange Board of India;
2. SEBI (Foreign Portfolio Investors) Regulations 2019;
3. Income Tax Act 1961;
4. Foreign Exchange Management Act 1999;

Applicability of the Circular

The circular containing guidelines concerning the surrender of FPI Registration will be applicable on the following:

1. Foreign Portfolio Investors;
2. Designated Depository Participants;
3. Custodians;
4. Depositories (NSDL and CDSL);
5. Recognised Stock Exchanges;
6. Clearing Corporations;

Key Guidelines Concerning the Surrender of FPI Registration

Based on the terms and provisions of the SEBI (Foreign Portfolio Investors) Regulations 2019, any Foreign Portfolio Investor desirous of surrendering the registration certificate may furnish a request for such surrender to the Designated Depository Participants.

Further, the Operational Guidelines for the Foreign Portfolio Investors and Designated Depository Participants were issued by way of SEBI Circular No. IMD/ FPI&C/ CIR/ P/ 2019/ 124, issued on 05.11.2019, prescribes the procedural intricacies to be complied with by the DDP for processing such surrender requests.

Also, it shall be noted that to have a uniform securities market practice for the processing of such surrender requests, the Designated Depository Participant needs to adhere to the additional guidelines as follows:

1. It shall be noted that while furnishing an application to the board, i.e., SEBI, for seeking “NOC” (No Objection Certificate)for surrender, the Designated Depository Participant will need to confirm the following listed with regard to the FPI:
2. All the accounts held by an applicant in the capacity of Foreign Portfolio Investor have NIL or zero balance and are blocked as well for further transactions., then, in that case, the CP code of the Foreign Portfolio Investor is also blocked;
3. There are no outstanding dues or fees pending towards the board, i.e., SEBI;
4. There are no pending actions or proceedings against the said applicant;
5. A Designated Depository Participant will ensure the following listed within a period of 10 working days, starting from the date of the receipt of the No Objection Certificate from SEBI:
6. all the accounts (comprising of the bank and securities account) kept by the applicant in the holding capacity of the  Foreign Portfolio Investment are closed; and
7. the deactivation of CP code was done;

Also, it shall be duly noted that all the Custodians and  Designated Depository Participants are directed to bring the provisions of the said circular to the notice of their respective clients.

Conclusion

In a nutshell, SEBI in furtherance of SEBI Circular No. IMD/ FPI&C/ CIR/ P/ 2019/ 124, issued on 05.11.2019, has passed a circular containing the additional guidelines that the Designated Depository Participant needs to adhere to regarding the surrender of FPI Registration.

Also, Read: SEBI Decides to Relax Timelines for Compliance Requirements

Official SEBI Circular on Guidelines Concerning the Surrender of FPI Registration

1617087784957