Sebi clears easier rules for foreign fund managers relocating to India

Mumbai, June 17: The Securities and Exchange Board of India(Sebi) on Friday approved the proposal to allow foreign fund managers to act as ‘Portfolio Managers’ under easier norms. As per the regulator, this move will make it easier for overseas fund managers to relocate to India. The relaxation in the portfolio managers regulations comes after the government announced taxation incentives for the offshore fund managers willing to relocate to India during the 2015-16 Union Budget.

The regulator will issue a consultation paper for 'amendments to the Sebi (Portfolio Managers) Regulations, 1993' to accommodate these norms. The proposed amendments include a separate section on 'Eligible Fund Managers' that would specify conditions that will apply to their activities as portfolio managers.

As per a media release, Sebi would also lay out a procedure for registration of an existing foreign based fund manager desirous of relocating to India or a fresh applicant to function as an Eligible Fund Manager. Sebi would also specify non-applicability of certain provisions of Portfolio Managers Regulations on Eligible Fund Managers.

These provisions would include 'High Water Mark Principle' regarding calculation of fees, disclosure of fees, obligation to act in a fiduciary capacity and audit of overseas fund. Besides, the rules regarding mandatory agreement between the portfolio manager and overseas fund, reporting about overseas fund and minimum investment requirements (R25 lakh) would also not be applicable for such overseas funds.

The rules regarding mandatory agreement between the portfolio manager and overseas fund, reporting about overseas fund and minimum investment requirements would also not be applicable for such overseas funds, Sebi said in the media release.

Sebi had initiated the consultation process with various stakeholders after union government had amended the Income Tax Act by inserting Section 9A. As per the amended Income Tax Act, fund management activity carried out through an Eligible Fund Manager located in India and acting on behalf of an Eligible Investment Fund EIF would not constitute a business connection in India of such a fund.

The EFMs would be required to segregate the funds and securities of the EIFs from that of other clients, provide information to Sebi on a halfyearly basis, ensure compliance to the Prevention of Money Laundering Act and other regulations. However, EFMs would be exempted from several provisions of the PMS Regulations with respect to the EIF, and would have to comply with the applicable regulatory and disclosure requirements of the jurisdiction of the EIF.