Sebi sticks to September 30 deadline for FII restructuring

The Securities and Exchange Board of India (Sebi) has clarified that it would not extend the September 30 deadline for foreign institutional investors (FIIs) to restructure themselves as broad-based entities. The regulator said non-compliant FIIs would not be allowed to take fresh positions from October 1.

“With effect from October 1, the FIIs and sub-accounts that have not complied (with the norms) will not be permitted to take fresh positions in the cash and derivatives markets, while they can retain their current positions or sell off/unwind,” Sebi said in a circular released on Wednesday. The regulator has also decided to upload the list of non-compliant entities on its website.

On April 15, Sebi had asked all FIIs, structured as multi-class vehicles (MCV), to have at least 20 individual investors, if they are maintaining a segregated portfolio for each class of shares, by September 30. An MCV is a structured entity where investors in each class have different contractual agreement with sub-accounts in regards to investment strategies, liabilities and fund manager.

Recently, there were reports that many FIIs and sub-accounts were finding it difficult to meet the deadline and, hence, would be approaching the regulator for an extension. The number of such FIIs and sub-accounts is estimated to be in the range of 250-500.

According to market sources, many FIIs and sub-accounts have been trying to involve rich individuals, apart from pension funds and university endowment funds, in their schemes to broad-base the structure. Sebi, in its attempt to bring in more transparency, has laid down that each class or units should have a minimum of 20 individual investors, or a minimum of three investors, of which at least one should be an institutional investor.