(1) No foreign portfolio investor may issue, subscribe to or otherwise deal in offshore derivative instruments, directly or indirectly, unless the following conditions are satisfied –
(a) such offshore derivative instruments are issued only by persons registered as Category I foreign portfolio investor;
(b) such offshore derivative instruments are issued only to persons eligible for registration as Category I foreign portfolio investors;
Explanation – For the purpose of this sub-regulation, where an entity has an investment manager who is from the Financial Action Task Force member country, the investment manager shall not be required to be registered as a Category I foreign portfolio investor;
(c) such offshore derivative instruments are issued after compliance with the ‘know your client’ norms as specified by the Board; and
(d) such other conditions as may be specified by the Board from time to time.
(2) A foreign portfolio investor shall ensure that any transfer of offshore derivative instruments issued by or on behalf of it, is subject to the following conditions –
(a) such offshore derivative instruments are transferred to persons subject to the fulfilment of sub-regulation (1); and
(b) prior consent of the foreign portfolio investor is obtained for such transfer, except in cases, where the persons to whom the offshore derivative instruments are to be transferred, are pre-approved by the foreign portfolio investor.
(3) A foreign portfolio investor shall fully disclose to the Board any information concerning the terms of and parties to off-shore derivative instruments, by whatever names they are called, entered into by it relating to any securities listed or proposed to be listed in any stock exchange in India, as and when and in such form as the Board may specify.
(4) A foreign portfolio investor shall collect the regulatory fee, as specified in Part C of the Second Schedule, from every subscriber of the offshore derivative instrument issued by it and deposit the same with the Board.
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CHAPTER V GENERAL OBLIGATIONS AND RESPONSIBILITIES OF FOREIGN PORTFOLIO INVESTORS General obligations and responsibilities of foreign portfolio investors.