SEBI has decided to sign MoUs with six countries Argentina, Turkey, Kuwait, Qatar, Ireland and Latvia to attract foreign investors to Indian stock market
New Delhi: With an aim to attract foreign investors from a larger number countries to the Indian capital markets, regulator Securities and Exchange Board of India (SEBI) may soon sign bilateral memorandum of understandings (MoUs) with its counterparts in at least six countries, reports PTI.
At the same time, SEBI will request the market regulators across various countries to allow the Indian market intermediaries operating in their jurisdictions to solicit business from interested qualified foreign investors (QFIs) at those places.
The steps are being taken by SEBI pursuant to suggestions made by the Ministry of Finance in this regard and would help attract more overseas investments through the QFI route, a senior official said.
The QFI framework was first put in place about a year ago and individuals, groups or associations from 45 countries, including Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Switzerland, UAE, UK and the US, are currently eligible to invest through the QFI route.
Foreign investors are allowed to invest directly through QFI route in stocks, mutual funds and corporate bonds through demat accounts opened with SEBI-registered Depository Participants, after meeting KYC (Know Your Client) norms applicable in the Indian markets.
However, the absence of an MoU between SEBI and the respective regulators in seven other countries (Argentina, Republic of Korea, Turkey, Kuwait, Qatar, Ireland and Latvia) make the entities in those jurisdictions ineligible to put money as QFIs into the Indian capital markets, the Finance Ministry had informed SEBI.
At the same time, certain restrictions imposed by SEBI's counterparts in a number of countries make it difficult for the entities in those jurisdictions to invest in India through the QFI route, the official said.
In order to remove these bottlenecks, SEBI has decided to sign MoUs with six countries -- namley Argentina, Turkey, Kuwait, Qatar, Ireland and Latvia.
SEBI would also seek to expedite the process in cases where it has already taken initiatives to enter into bilateral MoUs with regulators in other countrries.
SEBI is of the view that a bilateral MoU might not be required with its counterpart in Republic of Korea, as it is already a member of international body Financial Action Task Force (FATF) and a signatory to global market regulators' grouping IOSCO's multilateral memorandum of understanding (MMoU).
As per the current regulations, those permitted to invest as QFIs include individuals, groups or associations who are resident in a foreign country that is a Member of the FATF or a member of a group which is member of FATF and a Signatory of IOSCO's MoU, or a signatory of a bilateral MoU with SEBI.
QFIs do not include entities like FIIs, their sub-accounts and foreign venture capial investors. NRIs are also allowed to invest as QFIs, provided they have closed their demat accounts opened as NRI.
Originally, the QFI definition was limited to the 34 member countries of FATF.
In response to several enquiries from the Gulf region, the scope of the scheme was expanded in June 2012 to include residents of the member countries of Gulf Co-operation Council (GCC) and European Commission (EC) as these bodies / organisations are members of FATF.
With respect to the restrictions imposed by certain jurisdictions towards Indian intermediaries, SEBI has proposed to take up such issues proactively with their respective regulators to make it easier for entities in those countries to invest in India as QFIs.
SEBI would request the regulators in such jurisdictions, wherever appropriate, to exempt registered Indian intermediaries from any additional registration requirements for soliciting business from qualified residents in foreign jurisdictions.
The move follows concerns raised by market participants in the recent past that certain jurisdictions impose regulatory restrictions on Indian Intermediaries on soliciting investments from their investors, if such intermediaries have not obtained a prior registration with the regulatory authorities of such jurisdiction.
Observing that such restrictions pose a significant challenge to the QFI scheme, the Ministry of Finance had suggested that SEBI might take up the matter proactively with the regulators in such jurisdictions.
The issues were discussed in the last meeting of SEBI's board, where it was observed that the appropriate steps would be initiated by SEBI Chairman without further approval of the regulator's board.