Becoming an eligible fund manager to manage offshore funds has just got easier.
In a move that will help fund houses attract foreign investors, SEBI has eased framework for the registration of fund managers desirous of providing their services to offshore funds.
The market regulator has done away with a few requirements to become an eligible fund manager such as obligation to act in a fiduciary capacity, maintaining high water mark principle regarding calculation of fees and disclosure of fees, entering into agreement between portfolio manager and overseas fund, reporting requirement in respect of overseas fund and minimum investment requirement of Rs.25 lakh to help fund managers.
The decision is expected to boost the inflows in domestic markets. Offshore funds are meant for foreign investors. Typically, fund houses garner foreign assets by advising foreign investors through PMS or by launching offshore funds based out of Mauritius, Singapore etc.
In a circular, SEBI has said, “A new applicant desirous of providing fund management services to overseas funds, and compliant with the requirements specified in Section 9A of Income Tax Act, 1961, may seek registration with SEBI.”
The Union Budget 2015-16 had paved way for encouraging offshore fund managers to relocate to India by modify the Permanent Establishment (PE) norms by making amendments in income tax act. These changes were aimed at developing and promoting fund management industry in India.
Section 9A was inserted in the Income Tax Act, 1961 to provide a ‘safe harbour’ to overseas funds availing fund management services from Indian based managers, provided the fund and the manager comply with the requirements specified in the section.
