CIRCULAR
SEBI/HO/AFD/AFD-PoD-2/P/CIR/2024/77 June 05, 2024
To,
1. Foreign Portfolio Investors (“FPIs”)
2. Designated Depository Participants (“DDPs”) and Custodians
3. The Depositories
4. The Stock Exchanges and Clearing Corporations
Dear Sir / Madam,
Subject: Framework for providing flexibility to Foreign Portfolio Investors in
dealing with their securities post expiry of their registration
1. SEBI vide “Master Circular for Foreign Portfolio Investors, Designated Depository
Participants and Eligible Foreign Investors” No. SEBI/HO/AFD/AFD-PoD-
2/P/CIR/P/2024/70 dated May 30, 2024 (hereinafter referred to as the ‘FPI Master
Circular’) has, inter alia, specified the guidelines for registration of FPIs and the
investment conditions/ restriction on FPIs under Part A and Part C of the FPI
Master Circular respectively. The FPI Master Circular has been amended vide
SEBI Circular No. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/76 dated June 05,
2024. Further, SEBI vide Master Circular for Custodians No. SEBI/HO/AFD/AFD–
PoD-2/P/CIR/2024/40 dated May 10, 2024 (hereinafter referred to as the
‘Custodian Master Circular’) has, inter alia, specified the reporting requirements for
Custodians under Chapter IV of the Custodian Master Circular.
2. SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2024 were notified
on June 03, 2024, amending the SEBI (Foreign Portfolio Investors) Regulations,
2019, inter alia, for providing flexibility to Foreign Portfolio Investors (FPIs) in
dealing with their securities post expiry of their registration.
3. In view of the amendments to the SEBI (FPI) Regulations, 2019 referred to at Para
2 above, the FPI Master Circular stands modified as follows:
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3.1. Para 4 of Part A of the FPI Master Circular stands modified as under:
“4. Continuance of Registration
i. FPIs who wish to continue with their registration for the subsequent block
of three years, should pay the fees to their DDPs and inform change in
information, if any, as submitted earlier.
ii. In case of no change in information, FPIs shall give declaration that there
is no change in the information, as previously furnished.
iii. FPI shall provide the additional information, if applicable, along with
supporting documents including fees for continuance of its registration
at least 15 days prior to current validity of its registration in order to
facilitate a smooth continuance process. FPI is required to submit a
reason for delay, if any, in delayed submission of such information/fees.
iv. If DDP is in receipt of registration fees prior to validity date but the due-
diligence including KYC review is not complete by the validity date due
to non-submission of information by the FPI, no further purchases may
be permitted until intimation of continuance is given by DDP.
v. An FPI who fails to pay the requisite fees before expiry of validity of its
registration shall be permitted to pay the same along with a late fee and
re-activate its registration within a period of 30 days from the date of such
expiry. The re-activation of registration shall be subject to the FPI
complying with applicable KYC and Anti Money Laundering/Countering
the Financing of Terrorism (AML/CFT) requirements. The FPI shall be
permitted to dispose the securities held in its account during the period
from expiry of registration till re-activation of registration. However, no
fresh purchases of securities shall be permitted from expiry of
registration till re-activation of registration.
vi. Where the FPI has not paid fees for continuance of its registration within
the prescribed timelines, its FPI registration shall cease to be valid after
the date, up to which, the last registration fees were duly paid by the FPI.
vii. DDPs shall send suitable reminders to their respective FPI clients for
renewal of registration well in advance of such expiry.
viii. An FPI whose registration has expired and has failed to re-activate its
registration within the prescribed time period, shall be permitted to
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dispose the securities held in its account within 180 days from the expiry
of the prescribed 30 days’ time period for reactivation of registration. The
remittance of sale proceeds to the FPI shall be subject to applicable
KYC, AML/CFT requirements.
ix. It is clarified that till the expiry of the aforementioned 180-day period the
monetary/non-monetary corporate benefits/voting rights with respect to
such securities, if any, shall continue to accrue to the FPI.”
3.2. Para 13 of Part A of the FPI Master Circular stands modified as under:
“13. Reclassification
If an FPI registered under a particular category/sub-category fails to comply
with applicable eligibility requirements, it shall notify this change to its DDP to
be reclassified under appropriate category/sub-category in accordance with
Para 14(i) below. FPI may be required to provide to the DDP with additional
KYC documents, as applicable. The concerned DDP / Custodian shall not allow
such FPI to make fresh purchases till additional KYC requirements (if any) are
complied with. However, such FPI shall be allowed to continue to sell the
securities already purchased by it until expiry of its existing registration block or
180 days from the date of notification of change by the FPI, whichever is later.
3.3. Para 15 of Part A of the FPI Master Circular stands modified as under:
“15. Change in Status of a Compliant Jurisdiction
If a jurisdiction, which was a compliant jurisdiction at the time of grant of
registration to FPI, becomes non-compliant i.e. a) ceases to be a member of
IOSCO/ Bilateral Memorandum of Understanding with SEBI/ BIS or b) becomes
listed in FATF public statement as a "high risk" and "non-cooperative"
jurisdiction, then the Custodian shall not allow such FPIs to make fresh
purchases until the jurisdiction/FPI is compliant with the Regulations.
However, the FPI shall be allowed to sell the securities or continue to hold the
securities already purchased by it until expiry of its existing registration block or
180 days from the date of change in status of the jurisdiction, whichever is later.
The DDP shall inform to SEBI details of such FPIs upon such change.
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Further, in case the FPI itself or its underlying investors contributing twenty-five
percent or more in the corpus of the FPI or identified on the basis of control,
come under the Sanctions List notified by the United Nations Security Council,
the custodian shall not allow any further buy/sell in the account of such FPI and
shall as soon as possible but not later than two working days notify such
instances to SEBI.”
3.4. The following is added after para 16 of Part A of the FPI Master Circular:
“17. Dealing with securities that may be held by FPIs after expiry of their
registration and/or elapse of the time-period for disposal of securities
i. SEBI (Foreign Portfolio Investors) Regulations, 2019 and circulars
issued thereunder provide for blocking of fresh purchases / sale of
securities by FPIs within the prescribed time-period, in the following
instances:
a. breach of prescribed limits for contribution/control by NRIs/OCIs/RIs
in the corpus of the FPI (Para 1. ii. e. of Part A)
b. breach of prescribed limits for contribution by NRIs/OCIs/RIs in the
corpus of the FPI (Para 1. ii. f. of Part A)
c. non-submission of additional KYC documents, if applicable (Para 13
of Part A)
d. change in compliance status of the jurisdiction of the FPI (Para 15 of
Part A)
e. non-payment of fees (Para 4. viii. of Part A)
f. non-disclosure of granular details (Para 1. xxi. of Part C)
ii. In this regard, it is clarified that in cases where the FPI is required to
dispose of its holdings within a specified time-period but unable to do so
due to any regulatory agency/ statutory agency/ Court imposed
restrictions or directions from any enforcement agency, the time-period
for disposal shall be as per the direction of such enforcement agency/
regulator/ Court. In case no time-period for disposal is provided by such
enforcement agency/ regulator/ Court, the time-period for disposal shall
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be within 180 days of removal of such regulatory/ statutory restrictions.
During this period, unless specified otherwise, there shall not be any
restrictions on accrual of corporate benefits and exercise of voting rights
with respect to such securities held by the FPI.
iii. In case the FPI continues to hold securities pursuant to expiry of the
aforementioned time-period, the FPI shall be allowed to dispose the
same within an additional time-period of 180 days, in the following
manner subject to the following conditions:
a. Disposal of securities shall be subject to a financial disincentive of
5% of the sale proceeds, which shall be deducted by the custodian
of the FPI from the sale proceeds. The custodian shall remit the
amounts deducted as financial disincentive to the Investor Protection
and Education Fund created by SEBI (hereinafter referred to as
“IPEF”), not later than 30 days from the date of deduction of the
same.
b. The opportunity to sell the securities shall be subject to the FPI
fulfilling the prescribed KYC, AML/CFT requirements.
c. During this period, sale of suspended, unlisted/delisted securities
shall also be permitted through off-market transactions, in
accordance with the pricing guidelines for such sale as per FEMA
Rules, as specified in Para 3 of Part C below.
d. During this period the monetary/non-monetary corporate
benefits/voting rights with respect to the securities held by the FPI, if
any, shall continue to accrue to the FPI.
iv. Securities remaining unsold in the account of the FPI, after expiry of the
additional 180-day period, shall be deemed to have been compulsorily
written-off by the FPI. Accordingly, post the above-mentioned additional
180-day period, the FPI shall lose any beneficial interest in the said
securities including voting rights or any benefits arising from any
corporate action.
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18. Dealing with securities held by FPIs whose registration has expired
i. Disposal of securities by the FPIs as provided under the proviso to
Regulation 7(5) of the SEBI (Foreign Portfolio Investors) Regulations,
2019, shall be allowed in the following manner:
a. Sale of securities by such FPIs within 180 days from the date of
this Circular shall be allowed without any financial disincentive.
b. Securities that remain unsold after expiry of the 180-day period,
shall be allowed to be disposed within an ‘additional 180-day
period’ thereafter.
c. Sale of securities during the ‘additional 180-day period’ shall be
subject to a financial disincentive of 5% of sale proceeds, which
shall be deducted by the custodian of the FPI from the sale
proceeds. The custodian shall remit the amounts deducted as
financial disincentive to the IPEF, not later than 30 days from the
date of deduction of the same.
d. The opportunity to sell the securities shall be subject to the FPI
fulfilling the prescribed KYC, AML/CFT requirements, applicable
as on date.
e. During this period the monetary/non-monetary corporate benefits
/ voting rights with respect to the securities held by the FPI, if any,
shall continue to accrue to the FPI.
ii. Securities remaining unsold in the account of the FPI, after expiry of the
360-day period, shall be deemed to have been compulsorily written-off
by the FPI. Accordingly, the FPI shall lose any beneficial interest in the
said securities including voting rights or any benefits arising from
corporate action.”
3.5. The following is added after para 18 of Part C of the FPI Master Circular:
“19. Dealing with securities written-off by the FPIs/Deemed to have been
written-off by the FPIs
i. The written-off securities shall be transferred by the respective
custodians to a separate escrow account, operated by exchange
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empanelled broker not later than 30 days from the date of such securities
being written-off/deemed to have been written-off by FPIs. Monetary
corporate benefits if received by the custodians post write-off / deemed
write-off shall be credited to IPEF not later than 30 days from the date of
receipt of the same.
ii. Securities listed exclusively on one Stock Exchange (NSE or BSE) shall
be transferred to the escrow account operated by empanelled broker of
the respective stock exchange for this purpose. Balance securities shall
be transferred to the escrow account operated by empanelled broker of
NSE for this purpose.
iii. After transfer of securities to the escrow account, the empanelled broker
shall attempt to sell the securities at the available market price.
iv. The disposal of listed equity securities shall be carried out through the
regular online trading platform of the Stock Exchanges, excluding block
deal window.
v. The proceeds from the sale, net of brokerage and statutory charges,
shall be transferred to the IPEF.
vi. The disposal of written-off securities shall be done in terms of the
operational mechanism adopted by the Stock Exchanges and shall be
monitored by the Stock Exchanges. Stock Exchanges shall also monitor
the performance of the broker periodically, in terms of the efforts put in
by the broker for disposal of securities and shall have the option to
empanel a different broker, if deemed necessary.
vii. Stock Exchanges shall submit a report to the Board, as per the reporting
format at Annexure EA, on securities held in the escrow account,
transactions in the escrow account and amounts transferred to the IPEF,
on a quarterly basis, within 15 days of expiry of the quarter.”
4. The Custodian Master Circular stands modified as follows:
4.1. The following is added in the table under Para 4 titled “Submission of Monthly
Reports” of Chapter IV of the Custodian Master Circular:
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G Report on securities dealt in terms of Para 17(iii),
17(iv), 18(i) and 18(ii) of Part A of the FPI Master
Circular for the month
4.2. Further, reporting format at Annexure-1, in respect of the monthly report
mentioned at Para 4.1 above, is included in Annexure M of the Custodian
Master Circular.
5. The provisions of this circular except para 3.5 shall come into force with immediate
effect. Para 3.5 shall come into effect after 60 days from the date of this circular.
6. Recognized Stock Exchanges (National Stock Exchange and BSE Limited) are
advised to formulate and operationalise a mechanism for dealing with written-off
securities by their empanelled broker within 60 days from the date of this circular.
7. This Circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992 read with Regulations 7(5),
7(6), 7(8) and 44 of SEBI (Foreign Portfolio Investors) Regulations, 2019 to protect
the interest of investors in securities and to promote the development of, and to
regulate the securities market.
8. This Circular is available at www.sebi.gov.in under the link “Legal ---Circulars”.
Yours faithfully,
Manish Kumar Jha
Deputy General Manager
Tel No.: 022 –26449219
E-mail: manishkj@sebi.gov.in
Encl: 1. Annexure-1
2. Annexure EA
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