SEBI announces framework to monitor foreign holding in Depository Receipts
SEBI has recently come out with a framework with respect to foreign holding in Depository Receipts (DRs). As per the framework, a listed company will appoint one of the Indian depositories, for instance, either National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) as the designated depository for the purpose of monitoring of limits in respect of depository receipts.
The framework was prepared keeping in mind the obligations of Indian depositories and custodians to develop a system to monitor the foreign holding by way of depository receipts and communicate the information regarding outstanding DRs and available limit for conversion of those receipts into shares.
The designated depository in co-ordination with domestic custodian, other depositories and foreign depository (if required) will compute, monitor and disseminate the DRs' information as prescribed in the framework. The information shall also be disseminated on the websites of both the Indian depositories i.e. NSDL and CDSL. For this purpose, the designated depository will act as the lead depository and the other depository shall act as a feed depository.
Further, the investor group may appoint one such Foreign Portfolio Investor (FPI) to act as a nodal entity for reporting the details of all the FPIs forming part of the same investor group to its designated depository in the prescribed format. The FPIs who do not belong to the same investor group would report such investment holding details to their custodian on a monthly basis.
Therefore, the responsibility of monitoring the investment limits of FPI will be either with the respective designated depository or the custodian. In case where the investment holding breaches the prescribed limits, SEBI stated that the Indian depository or custodian will advise the concerned investor to divest the excess holding within five trading days.
