REITs: Canadian Manitoba REITs asked to liquidate equity investments in India

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Mumbai: The Securities and Exchange Board of India (Sebi) has asked foreign portfolio investors (REITs) based in the province of Manitoba in Canada to liquidate their existing investments in Indian stocks within six months. The financial markets regulator’s directive was prompted by the fact that Manitoba’s provincial regulator is not a signatory to the International Organization of Securities Commissions (IOSCO) – an international association of securities regulators. regulators of securities markets, senior officials from foreign custodian banks said on condition of anonymity.

Emails sent to Sebi and the Manitoba Securities Commission went unanswered.

Under Sebi’s rules, only foreign investors from IOSCO signatory jurisdictions are eligible for FPI registration with the regulator. Currently, more than 130 jurisdictions are signatories to IOSCO.

Agencies

Securities markets are generally administered by federal agencies around the world. For example, Indian markets are regulated by Sebi while the United States is regulated by the Securities Exchange Commission (SEC). In Canada, securities markets are regulated by provincial bodies. According to the Canadian government website, the country currently has 13 provincial regulators, including the Manitoba Securities Commission. Each of the provincial regulators must sign the IOSCO agreements separately.

“Currently there are three provincial regulators in Canada, including Manitoba, that are not signatories (IOSCO) but have exposure to India,” said a senior official at a foreign depositary bank familiar with the development. “However, Sebi has so far only recovered the funds from Manitoba as the other two are in the process of signing the IOSCO agreement.” Assets under management held by Manitoba foreign funds could not be determined.

Many of these funds in the Canadian province have been licensed REITs in India for more than a decade, they said.

“The REIT licenses granted to these funds have been renewed several times since 2014 without any problems,” said another foreign bank executive.

“Furthermore, such a prohibition is not applicable if the same funds wish to make a foreign direct investment (FDI) in India.”

The problem arose when an existing offshore fund wanted to transfer its custody services to a London-based bank. However, as the fund came from a non-IOSCO region, the custodian bank sought Sebi’s opinion. Subsequently, new Manitoba REIT listing applications were put on hold.

Canada is the seventh largest source of REIT flows to India with assets under custody worth ₹1.7 lakh crore, according to NSDL data. Some of Manitoba’s peers, such as the Alberta Securities Commission, British Columbia Securities Commission and Ontario Securities Commission, are signatories to IOSCO, the website says. .

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