The Securities and Exchange Board of India (Sebi) has proposed norms for foreign fund managers keen on relocating to India to act as ‘Portfolio Managers’ under a relaxed regulatory regime. The latest Sebi move follows the taxation incentives for offshore fund managers who are willing to relocate to India.
In a consultation paper for ‘amendments to the Sebi (Portfolio Managers) Regulations, 1993’, which aims at making it easier for the overseas funds to relocate to Indian shores, Sebi has proposed amendments including a separate section on ‘Eligible Fund Managers’, which specify conditions that will apply to their activities as portfolio managers. The new rules have also specified the procedure to be followed by a Sebi-registered portfolio manager to function as an Eligible Fund Manager.
Besides, Sebi has proposed to lay out the 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. While listing out the obligations and responsibilities of Eligible Fund Managers, Sebi has proposed non-applicability of certain provisions of portfolio managers regulations on Eligible Fund Managers.
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These provisions include ‘High Water Mark Principle’ regarding calculation of fees, disclosure of fees, obligation to act in a fiduciary capacity and audit of overseas fund.
The rules regarding mandatory agreement between the portfolio manager and overseas fund, reporting about overseas fund and minimum investment requirements (Rs 25 lakh) would also not be applicable for such overseas funds. After the announcement in the Union Budget, a new section was added to the Income Tax Act to provide that the fund management activity carried out through an Eligible Fund Manager (EFM) located in India and acting on behalf of an Eligible Investment Fund (EIF) would not constitute business connection in India of such a fund.
Sebi’s has decided to initiate a consultation for changes to its norms for Portfolio Managers. Sebi has proposed procedure for registration of an existing foreign-based fund manager desirous of relocating to India, or as a fresh applicant. Such applicants will be granted registration as Portfolio Managers to act as an EFM, provided they meet existing eligibility norms of being a body corporate, having net worth of Rs 2 crore, appointment of a Principal Officer and minimum two employees with requisite credentials.