Sebi Eases Large Trusted FPIs Entry, Lowers MF Exit Load To Max 3 %, Reclassifies REITs As Equity

Sebi Board approved introduction of Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI) framework for FPIs and Foreign Venture Capital Investors (FVCIs) to facilitate easier investment access for objectively identified and verifiably low-risk foreign investors.

For trusted foreign investors SWAGAT-FI will "enable a unified registration process across multiple investment routes for these entities and minimize repeated compliance requirements and documentation for such investors," Sebi said.

Foreign investors eligible for identification as SWAGAT-FIs include Government and Government-related investors, such as central banks, sovereign wealth funds (SWFs), international or multilateral organizations/agencies, and entities controlled or at least 75 per cent owned (directly or indirectly) by such entities. Also appropriately regulated Public Retail Funds (PRFs) with diversified investors and investments, managed independently and regulated by their home jurisdiction, including mutual funds and unit trusts open to retail investors, operating as blind pools with diversified investments and independent investment managers. Also insurance companies investing proprietary funds without segregated portfolios and pension funds regulated in their home jurisdictions.

Sebi also disclosed launch of a new website titled ‘India Market Access’ (www.indiamarketaccess.in), developed as a dedicated platform for current and prospective FPIs. The website is a unified initiative by India’s market infrastructure institutions (MIIs) -National Stock Exchange, Bombay Stock Exchange, Indian Clearing Corporation, NSE Clearing, CDSL and NSDL.

To facilitate enhanced participation of Mutual Funds in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) Sebi has approved re-classifying REITs as “equity” and retaining the “hybrid” classification for the InvITs, for the purpose of investments by mutual funds and specialized investment funds(SIF).

To facilitating enhanced investor protection and financial inclusion in mutual fund space Sebi approved reduction of maximum permissible exit load from 5 per cent to 3 per cent; revision of incentive structure for distributors for new inflows to mutual fund industry from beyond top 30 cities and introduction of an incentive structure for distributors for on-boarding new women investors.

Sebi Board has decided to recommend to the Ministry of Finance an extended timeline for large companies going public where large equity dilution is a challenge of 5 years( market cap of Rs 1lakh crore -5 lakh crore) and 10 years( market cap of above Rs 5 lakh crore) for attaining minimum 25 per cent public shareholding(MPS) along with changes in anchor allocation rules.

The Board recommended that the proposed extended timelines may also be made applicable to the listed entities that are yet to comply with the MPS, as per the existing timelines applicable to them; and the ones that are non-compliant with the existing MPS requirements and are likely to get more time to achieve MPS upon notification of extended timelines.

Sebi has proposed amendments to the regulations relating to anchor investor allocations to facilitate participation of long-term investors. At present, reservation in the anchor book of a public issue is available only to domestic mutual funds, excluding other long-term institutional investors such as Life Insurance Companies and Pension Funds.

The overall reservation for the anchor portion has been increased from one-third of qualified institutional buyers quota to 40 per cent. Of this, one-third will continue to be reserved for domestic Mutual Funds, while remaining will be reserved for Life Insurance Companies and Pension Funds. In case of undersubscription, the unsubscribed part will be available for allocation to domestic Mutual Funds.

For Improving regulatory outreach and response of Sebi, the Board decided to establish local offices at State capitals and other major cities in a phased and graded manner. In the first phase, the major cities where Sebi intends to establish local offices are Chandigarh, Jaipur, Lucknow, Guwahati, Bhubaneswar, Vijayawada, Hyderabad and Bengaluru. Other states and major cities would be considered in subsequent phases.