Sebi issues framework for FPIs to dispose of securities after expiry of registration

New Delhi, Jun 5 (PTI) Markets regulator Sebi on Wednesday issued the framework for Foreign Portfolio Investors (FPIs), which will make it easier for such investors to deal with securities lying in their demat accounts after the expiry of their registration.

Under the current rule, Foreign Portfolio Investors (FPIs) are required to have a valid registration as long as they hold securities in India. In order to keep their registration valid, they need to pay the registration fee for every block of three years. Non-payment of fees lead to FPI's registration expiring.

Further, current rules do not provide for liquidation of securities by FPI after the expiry of their registration and the securities held by such FPI remain frozen in their demat accounts.

As on June 30, 2023, there were 55 FPIs, whose registration has expired, holding securities about Rs 3,300 crore in their demat accounts, as per Sebi's information.

FPI registrations that expire due to non-payment of registration fee, would now be permitted to be reactivated within 30 days from such expiry. Such FPIs would also be permitted to dispose of their securities holdings during these 30 days, according to a Sebi's circular.

Further, in cases where the FPI chooses not to reactivate its registration within 30 days, it would be allowed 180 days for disposal of its securities.

The registration fee for FPIs is currently USD 2,500 for Category I, and USD 250 for Category II.

A minimum time-period of 180 days or end of registration block, whichever is later, will be provided for disposal of securities in case of adverse change in compliance status of the home jurisdiction of the FPI and non-submission of documents for reclassification of FPI category from I to II.

In cases where the securities held by an FPI have not been disposed of even after the lapse of the specified time period of 180 days, Sebi said additional time period of 180 days will be provided to the FPIs for disposal of their securities. This is subject to a financial disincentive of 5 per cent of sale proceeds, which will be credited by the custodian to Sebi's Investor Protection and Education Fund (IPEF).

Securities remaining unsold after expiry of the additional 180-day period will be deemed to have been compulsorily written-off by the FPI. This will be applicable to all FPIs where the registration expires due to any reason.

For existing cases, where securities are lying in the accounts of FPIs whose registration has expired, a one-time opportunity of 360 days (180 days without any financial disincentive, and an additional 180 days with a 5 per cent financial disincentive) will be provided for disposal of such securities.

Further, written-off securities will be transferred to an escrow account, operated by an exchange empanelled broker, who would attempt to sell the securities at the available market price until the securities are disposed-off. The proceeds from the sale will be transferred to Sebi's IPEF. PTI SP TRB