This alert summarizes a recent Consultation Paper (CP) released by the Securities and Exchange Board of India, dated 6 August 2024 in relation to foreign investors accessing the Indian securities markets through segregated portfolios / P-notes / Offshore Derivative Instruments (ODIs) seeking to make sweeping changes to the operational mechanism and reporting requirements for such non-resident investors / ODI issuers.
In summary, the following key changes are being proposed via this consultation paper:
- The SEBI Circular of 24 August 2023 which mandated granular reporting of ultimate investors in case of FPIs breaching prescribed concentration or size limits is proposed to be made applicable at the ODI subscriber and segregated portfolio level.
- The current exceptions provided to ODI issuers to hedge their ODI issuances with underlying derivatives is proposed to be withdrawn and ODI issuers would henceforth be required to fully hedge the ODIs issued with the same securities on a one-to-one basis, throughout the life of the ODI.
- ODI issuers would need to have a separate FPI registration for proprietary investments with the hedging activity effected through a dedicated FPI for this purpose.
The last date to provide comments is 27 August 2024.