The consultation paper will be placed on SEBI website seeking public comments.
In its board meeting held in Mumbai today, SEBI board has agreed to come out with a consultation paper proposing certain changes in the portfolio managers regulations.
Following the announcement in the Union Budget 2015-16, Income Tax Act, 1961 has been amended by inserting Section 9A in the Act (popularly known as ‘Safe Harbour Norms’). This section provides that fund management activity carried out through an eligible fund manager located in India acting on behalf of an eligible investment fund (overseas fund) will not constitute business connection in India of such fund, subject to the fund and the fund manager meeting certain conditions.
The regulator will come out with a concept paper on PMS regulations which will cover the following areas:
1) Insertion of a separate Chapter II-A “Eligible Fund Managers” which will apply to eligible fund managers exclusively pertaining to their activities as portfolio managers to eligible Investment funds.
2) Procedure for an existing SEBI registered portfolio manager to function as an eligible fund manager
3) 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
4) Obligations and responsibilities of eligible fund managers
5) Non applicability of certain provision of Portfolio Managers Regulations on eligible fund managers, such as:
a. High Water Mark Principle regarding calculation of fees, disclosure of fees
b. Obligation to act in a fiduciary capacity
c. Audit of overseas fund
d. Entering into agreement between the portfolio manager and overseas fund
e. Reporting requirements in respect of overseas fund
f. Minimum investment requirements (Rs. 25 Lakhs), etc.
Also, the regulator will come out with a consultation paper which will propose smoothening the process of registration of REITs and give clarity on the process of launch. The consultation paper will propose certain changes and provide clarifications in the REIT Regulations by covering the following areas:
1) Removing the restriction on the SPV (only in case of such SPV being a Holding Company) to invest in other SPVs holding the assets
2) Change in the number of sponsors
3) Rationalization of compliance with respect to Related Party Transactions (RPTs) requirements
4) Aligning minimum public holding requirement with SCRR
5) Allowing REITs to invest up to 20%, in under construction assets
6) Responsibilities of trustee and its associates
