55 de-registered FPIs hold Rs 3,300 cr worth securities: Sebi, proposes liquidation framework

Some FPIs may also be given a one-time opportunity to liquidate their security holdings, without any disincentive

The market regulator has proposed a framework to provide flexibility to foreign portfolio investors (FPIs) to deal with their securities after their registration expires.

In a consultation paper released on February 7, the Securities and Exchange Board of India (SEBI) said that as of June 30, 2023, there are 55 FPIs whose registration expired and are holding securities valued at approximately Rs 3,300 crore in their demat accounts.

The paper said that FPI Regulations, 2019, do not provide for the regularisation of FPI registration or disposal of securities after the expiry of registration.

There are no regulatory prescriptions for dealing with securities that remain in the demat accounts of FPIs, post expiry of registration and expiry of prescribed timelines for liquidation; and securities written-off by the FPIs.

To get around these situations, the SEBI FPI Advisory Committee have proposed changes such as allowing FPIs to regularise their registration after expiry with a late payment charge and allowing FPIs to liquidate their holdings within a prescribed time limit after the expiry of their registration.

Guidelines on how the FPIs should dispose of their securities have also been proposed.

In dealing with existing cases of non-compliant FPIs with blocked securities in their accounts, the regulator has suggested that a one-time opportunity be provided for the disposal of securities of such FPIs.

FPIs whose registration has expired, before issuance of this proposed framework, shall be provided an opportunity to sell the securities lying in their demat accounts within 180 days from the date of issuance of this framework.

This opportunity to dispose off the securities shall be without any financial disincentive and shall be subject to the FPI complying with KYC and AML/CFT norms, applicable as of date, said the consultation paper.

If the securities have not been disposed within this timeline by approaches suggested in the consulting paper, those securities will be considered to have been compulsorily written off by the FPI.

These compulsorily written-off securities shall be transferred by the

custodian to a separate escrow account, operated by exchange empanelled

broker. The broker shall attempt to sell the securities at the available market price on a weekly basis until the securities are disposed off. The proceeds from the sale, net of brokerage and statutory charges, shall be transferred to the Investor Education and Protection Fund (IPEF), according to the consultation paper.