SEBI sets rules for foreign investment funds

SEBI sets rules for foreign investment funds

New Delhi:

On Thursday, Sebi issued new guidelines for Alternative Investment Funds (AIFs) and Venture Capital Funds (VCFs) to make overseas investments, under which foreign companies will not need have an Indian connection.

Under the rules, OFIs can invest in securities of companies incorporated outside India. In addition, venture capital funds are allowed to invest in offshore venture capital firms, under certain conditions.

One of the conditions was that these overseas investments were only allowed in companies that had a connection with India. For example, a company has a front office overseas, while having its back office operations in India.

“The requirement for the foreign invested company to have an Indian connection (…) has been removed,” the Securities and Exchange Board of India (Sebi) said in a circular.

Under the new guidelines, AIFs or VCFs will be permitted to invest in a foreign issuing company, which is incorporated in a country whose securities market regulator is a signatory to the International Securities Commissions Organization Multilateral Memorandum of Understanding. values ​​(IOSCO) or a signatory to the bilateral memorandum of understanding with Sebi.

Further, OFIs or VCFs will not invest in a foreign issuing company, which is incorporated in a country identified by the Financial Action Task Force (FATF) as a jurisdiction with a strategic role in the fight against money laundering. money or the financing of terrorism to which counter measures apply.

In addition, these entities have been prohibited from making an investment in a country that has not made sufficient progress in addressing deficiencies or committed to an action plan developed with the FATF to address these shortcomings.

AIFs or VCFs will need to apply to Sebi for the allocation of the overseas investment limit in the format.

“If an AIF/VCF liquidates an investment made in a foreign company, the sale proceeds received from such liquidation, to the extent of the investment made in said foreign company, will be available to all AIF/VCF for reinvestment”, said the regulator said.

Further, OFIs or VCFs will only sell the investment in beneficiary foreign companies to entities eligible to make overseas investments.

AIFs or VCFs will be required to provide outward investment disposal details to the capital markets regulator in a specified format within three business days to update the aggregate limit available for outward investment per these entities. In addition, all overseas investments sold/disposed of by them till date will also be reported to Sebi within 30 days.

AIFs are funds established or incorporated in India for the purpose of pooling capital from Indian and foreign investors to invest according to a pre-determined policy, while VCF is an AIF that mainly invests in unlisted securities of startups, early-stage venture capital firms. primarily involved in new products, new services, activities based on technology or intellectual property rights or a new business model. PTI SP HTA

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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