Conditions for issuance of Offshore Derivative Instruments under SEBI (Foreign Portfolio Investor) Regulations, 2014
Summary
This circular aligns eligibility and investment norms for Foreign Portfolio Investors issuing Offshore Derivative Instruments with the FPI Regulations, 2014. It mandates that ODI subscribers must meet specific residency and structural criteria, including anti-money laundering standards and transparency requirements. The document further clarifies how investment restrictions apply to ODI positions and establishes a transition period for existing non-compliant holdings.
Text
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.
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.
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 or a signatory to bilateral Memorandum of Understanding with the Board
the applicant being a bank, is a resident of a country whose central bank is a member of Bank for International Settlements
the applicant is not resident in a country identified in the public statement of Financial Action Task Force as having strategic AML/CFT deficiencies or insufficient progress
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.
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
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
FPIs which issue ODIs shall put in place necessary systems to ensure compliance with above provisions as mentioned in paragraph 2, 3 and 4.
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.
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.
Source: SecMarx — Conditions for issuance of Offshore Derivative Instruments under SEBI (Foreign Portfolio Investor) Regulations, 2014. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.