UBS AG is a Category II registered FPI and is not a promoter of any listed entity. Regulation 32(2)(d) of the FPI Regulations requires the depository participant engaged by an FPI to ensure that equity shares held by the FPI are free from encumbrances and to obtain a declaration from the FPI to this effect. UBS AG, under the SEBI (Informal Guidance) Scheme, 2003, sought certain clarifications from SEBI:

i. whether the term ‘encumbrance’ would include non – disposal undertakings in relation to the FPIs who are investors in the capacity of acquirer and not promoter.[1]; and

ii. whether the FPIs are restricted from executing non disposal undertaking with third parties by providing limited undertaking to the depository participant.

SEBI, by way of clarification dated March 14, 2018, was of the view that the term ‘encumbrance’ would include non – disposal undertakings and accordingly, FPIs would not be permitted to execute the non – disposal undertakings.

[1]     It is pertinent to note that the term ‘encumbrance’ is not defined under the FPI Regulations. However the term includes pledges, liens, non disposal undertakings and other transactions in terms of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.