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Mumbai, Oct. 15 SEBI wants foreign institutional investors and their sub-accounts to report to it the position of Indian securities lent by them overseas.

SEBI will post this information twice a week, Tuesday and Saturday, on its Web site, said the regulator in a news release on Wednesday.

Separate instructions are being issued to the FIIs and custodians for submission of this data to SEBI, said the release.

The markets regulator wants the data to see if there is any correlation between overseas lending of these securities and domestic sale of shares by FIIs.

“Sales in the Indian market by FIIs and their sub-accounts are also possible on account of the securities being lent by these FIIs/sub-accounts abroad,” said SEBI in a news release on Wednesday.

This is in order to lend more transparency to the market, said SEBI.

The data collected will help SEBI evaluate if overseas securities lending by FIIs is creating selling pressure on them in the domestic markets.

The first such data will be provided on the SEBI Web site on Friday, October 17, covering the activity between Friday, October 10, to Tuesday, October 14.

An FII that directly operates in the Indian market could be lending shares, say, to another FII abroad. However, the regulations on this are unclear, said Mr Akil Hirani, Managing Partner, Majmudar & Co, an international law firm.

The lending of such shares overseas would typically fall under FEMA and RBI regulations, he said. “There is no clarity on this under FEMA. And a conservative view would hold that RBI may not permit it.”

As far as direct Indian shares go, RBI has more powers than SEBI. On FIIs, RBI has no jurisdiction directly. However, SEBI may ask for information from FIIs and RBI could act on this, which is what it could be doing, said another legal expert.

When SEBI issued restrictions on issue of P-Notes by FIIs, it was not challenged. So SEBI’s asking for information on shares lent may also not be challenged, he said.

However, some legal advisors to FIIs said compliance to this directive would present some impractical difficulties.

The Government and the regulators are doing everything possible to stem the unceasing outflows from sale of equities by FIIs, who have sold for around $10 billion in the market so far this year.

FIIs, facing pressure overseas from their constituents, are selling Indian stocks at every leg of market gain. A small gain triggers off yet another round of selling, said a stock market analyst. Maybe this will move by SEBI will bring to bear some pressure on them and constrict outflows, he said.

More Stories on : Foreign Institutional Investors | Regulatory Bodies & Rulings | Stock Markets

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