• IND SEBI issued consultation paper on investment by foreign investors through segregated portfolios/ participatory-notes/ offshore derivative instruments.

Objective

• Investments made by foreigners through Offshore Derivative Instruments (referred to as ODIs) or through segregated portfolios of FPIs are currently not subject to the same set of disclosure as well as other regulatory requirements as regular FPIs.
• This includes the additional disclosure requirements on objectively identified FPIs under the SEBI circular dated 24 August 2023.
• The proposals in the consultation paper seek to address this regulatory arbitrage.

Proposal

• Applies disclosure requirements directly to ODI subscribers and segregated portfolios.
• Prohibits the issuance of ODIs with derivatives as underlying; mandates separate FPI registration for issuing ODIs in order to ensure clear segregation and compliance.

Effectiveness

• The consultation is open until 27 August 2024.