Regulation 22 - Conditions for issuance of offshore derivative instruments - Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

Conditions for issuance of offshore derivative instruments. 22. (1) No foreign portfolio investor may issue, subscribe to or otherwise deal in offshore derivative instruments, directly or indirectly, unless the following conditions are satisfied: (a) such offshore derivative instruments are issued only to persons who are regulated by an appropriate foreign regulatory authority; (b) such offshore derivative instruments are issued after compliance with know your client norms: Provided that those unregulated broad based funds, which are classified as Category II foreign portfolio investor by virtue of their investment manager being appropriately regulated shall not issue, subscribe or otherwise deal in offshore derivatives instruments directly or indirectly: Provided further that no Category III foreign portfolio investor shall issue, subscribe to or otherwise deal in offshore derivatives instruments directly or indirectly. 1 [(c) such offshore derivative instruments shall not be issued to or transferred to persons who are resident Indians or non-resident Indians and to entities that are beneficially owned by resident Indians or non-resident Indians.] 2 [(2) A foreign portfolio investor shall ensure that any transfer of offshore derivative instruments issued by or on behalf of it, is made subject to the following conditions: (a) such offshore derivative instruments are transferred to persons subject to fulfillment of sub-regulation (1); and (b) prior consent of the foreign portfolio investor is obtained for such transfer,except when the persons to whom the offshore derivative instruments are to be transferred to are pre-approved by the foreign portfolio investor.] (3) Foreign portfolio investors shall fully disclose to the Board any information concerning the terms of and parties to off-shore derivative instruments such as participatory notes, equity linked notes or any other such instruments, by whatever names they are called, entered into by it relating to any securities listed or proposed to be listed in any stock exchange in India, as and when and in such form as the Board may specify. (4) Any offshore derivative instruments issued under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 before commencement of these regulations shall be deemed to have been issued under the corresponding provision of these regulations. 3 [(5) A foreign portfolio investor shall collect regulatory fee, as specified in Part C of the Second Schedule, from every subscriber of offshore derivative instrument issued by it and deposit the same with the Board.] *********** 1 Inserted by the Securities and Exchange Board of India (ForeignPortfolio Investors) (Third Amendment) Regulations, 2017, w.e.f. 25.5.2017. 2 Substituted by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2016, w.e.f. 8-7-2016. Prior to substitution, sub-regulation (2) read as under: (2) A foreign portfolio investor shall ensure that further issue or transfer of any offshore derivative instruments issued by or on behalf of it is made only to persons who are regulated by an appropriate foreign regulatory authority. 3 Inserted by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Fourth Amendment) Regulations, 2017, w.e.f. 20-7-2017.