SEBI Off Market Transfer of Securities by FPI’s 

• Securities and Exchange Board of India has recently issued a circular on June 01, 2021 regarding the off-market transfer of securities by FPI’s.

• Earlier, the Securities and Exchange Board of India did not allow the cashless transfer of securities between FPI’s with different PAN. SEBI to make it easier for foreign funds to relocate to International Financial Services Centre has allowed the off-market transfer.

• The SEBI recent circular talks about one-time off-market transfer of securities. Foreign funds which are registered with SEBI as an FPI (Foreign Portfolio Investors) and intend to relocate to IFSC required a fresh FPI license. Therefore they required to transfer the securities from their old Demat A/C to new A/C, which is identified as IFSC FPI. SEBI has decided that FPI may approach its DDP (Designated Depository Participant) for approval of a one-time off-market transfer of its securities to the subsequent fund. The DDP after due diligence may give its approval for one time off-market transfer of securities for such relocation. FPI’s have to carry out the transfer of securities by selling from the old demat on the exchange and buying the securities in the new Demat account.

• Recent Finance Bill, 2021 had allowed a wholly-owned special purposes vehicle (SPV) of an off-market fund to transfer securities to an IFSC fund in Gujarat. The SEBI with this circular gives flexibility to the fund manager to either shift the entire fund structure to the IFSC or to adopt a master-feeder structure.

• The Finance Act, 2021 provides tax benefits for relocating foreign funds to IFSC in order to make the IFSC in GIFT city, Gujarat a global financial hub. The FPI’s who approach DDP’s for one time off-market transfer of securities may relocate it after the due diligence process. Relocation request will denote that the FPI has deemed to have applied for the surrender of its registration. SEBI through its circular clarifies that “The off-market transfer shall be allowed without prejudice to any provision of tax laws and FEMA.”

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.