Amendments in eligibility for Qualified Depository Participant and Retention period in case of investments in Indian Mutual Funds by QFIs
Securities & Exchange Board of India (SEBI) in consultation with RBI has recently allowed Qualified Financial Institutions (QFIs) to invest in the schemes of Indian Mutual Funds and Indian equity shares. For executing these transactions the QFIs are required to open demat accounts only with SEBI registered Qualified Depository Participant (QDP) as provided by Circulars No. Cir/IMD/DF/14/2011 and Cir/IMD/FII&C/3/2012 dated 9th August, 2011 and 13th January, 2012 respectively. The circulars along with other requirements also provided for the eligibility required to be registered as QDP and the process and requirements of inward and outward remittances of funds of QFIs.
In furtherance to the above circulars, SEBI has vide Circular No. CIR/ IMD/ FII&C/ 4/ 2012 dated 25th January, 2012 made certain amendments in the aforesaid circulars as followings:
In furtherance to the above circulars, SEBI has vide Circular No. CIR/ IMD/ FII&C/ 4/ 2012 dated 25th January, 2012 made certain amendments in the aforesaid circulars as followings:
- As per latest circular, now a DP to be registered as QDP would be required to have a net worth of Rs. 50 Crore instead of earlier notified Paid Up Capital.
Further, the earlier above mentioned circulars (i.e. 9th August, 2011 for MF and 13th January, 2012 for Equity) provided for different time period with respect to retention period of QFI’s funds and dividend payouts etc. The latest circular has made the provisions in this respect uniform both in case of investments in MF as well Equity. The amended provisions are:
- For purchase order placed by QFIs with its DP and for purchase of units of equity and debt schemes of MF, if the units are not allotted, the time limit for remitting back the money to the QFI’s designated overseas bank account has been amended from 3 working days to 5 working days (including the date of receipt of foreign inward remittance into the single rupee pool bank account).
- QFI’s can make fresh purchase of units of equity and debt schemes of MF out of the redemption proceeds received within a specified time period. In case no purchase of units are made out of redemption proceeds, the time period for remitting back the money to the QFI’s designated bank overseas account has now been amended from 2 working days to 5 working days (including the date of receipt of foreign inward remittance into the single rupee pool bank account).
- Dividend payments to QFI’s on account of investment in schemes of Indian Mutual funds can be credited to the single rupee pool bank account which in turn remitted it to the QFI’s designated bank accounts within 5 working days (including the day of credit of such funds to the single rupee pool bank account) instead of 2 working days. It is now further allowed that now dividend payments can also be utilized for fresh purchases in schemes of Indian mutual funds within these 5 working days.
Highlights of decisions taken by SEBI in its board meeting held on 28th January, 2012
Reservation to Holders of Convertible Debt Securities in Rights/Bonus Issues
It is discussed and decided by the SEBI Board that at time of bonus/ right issues of equity shares, only the outstanding Compulsorily Convertible Debt holders (not having option of conversion) shall be given reservation in such issue.
Waiver of certain requirements in case of Preferential allotment to Insurance Companies and Mutual Funds
The Board has decided to exempt Insurance Companies and Mutual funds from following requirements of SEBI (Issue of Capital and Disclosure Requirements) Regulations:
The ineligibility of entities who have sold any of their holding during preceding six months of preferential allotment shall not be applicable to Insurance Companies and Mutual Funds.
- Insurance Companies and Mutual Funds are further exempted from the requirement of lock-in of their pre- preferential holding. Though the shares allotted subsequent to preferential allotment shall be locked-in.
Amendment to SEBI (Mutual Fund) Regulations, 1996
• Amendment relating to Advertisement Code:
The SEBI Board has proposed to amend the Advertisement Code applicable to Asset Management Companies to bring in more transparency, accuracy and fairness in the advertisements.
• Amendment relating to Investment Valuation Norms:
The board has further proposed to amend SEBI (Mutual Fund) Regulations to include provision for fair treatment of all investors as well as providing clarity in case of valuation of debt and money market Securities not traded on particular valuation day.
Amendment to SEBI (Portfolio Managers) Regulations, 1993
In case of minimum threshold investment limit which a portfolio manager can accept from its clients, the SEBI Board has increased the limit from Rs. 5 Lakhs to Rs. 25 Lakhs on prospective basis. The amendment entails to discourage retail investment and to promote only high net worth investment with portfolio managers.