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Informist, Tuesday, Sep 3, 2024

 

--SEBI Narayan: Custodian fee may rise due to fast remittance to FPIs

--CONTEXT: SEBI Whole-time Member Ananth Narayan at CII summit

--SEBI Narayan: From next wk, custodians to remit funds to FPIs on T+1

--SEBI Narayan: Low custodian fee to FPIs due to overnight funds float

--SEBI Narayan: Custodians till now charging near zero fee to FPIs

 

MUMBAI – Custodians may increase their fees charged to their foreign portfolio investor clients following the directive of the Securities and Exchange Board of India to them to remit funds to FPIs on the day of settlement, which is typically T+1, SEBI Whole Time Member Ananth Narayan said today.

 

From next week, custodians will get clearances from tax consultants on T+0 itself which will enable them to remit funds to FPIs on the day of the settlement, that is T+1, instead of the current practice of remitting the funds the day after the settlement, Narayan said while addressing a Confederation of Indian Industry summit here.

 

Currently, custodians charge near zero fees to FPIs due to the overnight float enjoyed by them due to the one-day delay in paying out funds to FPIs, Narayan said. Under the new structure, FPIs will benefit by receiving funds for their sales faster and the custodian fee structure will reflect the true nature without hidden charges, he said.

 

Speaking at an event last week, Narayan said the typical float lying with custodians was around 1 trln rupees, of which a significant portion arises from the lag in remitting funds to the FPI. 

 

Not just custodians but all market intermediaries which levy charges on their investor clients must have an explicit fee structure and not an opaque one with implicit benefit from something else, Naryan said today.

 

The SEBI member said another area where an improvement is being made with regard to FPIs is the disclosure regime for overseas derivative instruments, or P-Notes. “We have put out a consultation paper that overseas derivative instruments are also subject to enhanced disclosures” as certain identified FPIs are currently making. This will provide a level playing field for all FPIs.

 

Narayan was referring to the enhanced disclosure regime, introduced by SEBI in August 2023, which requires high-risk FPIs to disclose the end-beneficial ownership details in their disclosures to SEBI.

 

The consultation paper also proposed making those FPIs disclose more in case they have any segregated portfolios which could have portfolio concentration and other risks, according to Narayan. Quality of FPI investments was a huge priority for the regulator, he said.  End

 

Reported by Rajesh Gajra

Edited by Saji George Titus

 

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