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Mumbai: The capital-markets regulator has barred Indian citizens, including those ordinarily resident overseas, from buying depository receipts ( DRs ) issued by locally-listed companies, seeking to tighten ownership rules on entities that are raising funds through equity sales abroad.Corporate lawyers said it is not clear whether the new rules, framed by the Securities and Exchange Board of India ( Sebi ), would extend to Indian mutual funds as well.“Permissible holders of DRs (including their beneficial owners) now exclude persons resident in India and non-resident Indians. It is unusual for Sebi to specify such categories of people — this is the central bank’s domain,” said Sandip Bhagat, partner at law firm S&R Associates.“Indian mutual funds registered with Sebi are currently permitted to invest in DRs subject to certain conditions, and it will need to be clarified whether they are now restricted as persons resident in India,” Bhagat said.Depository receipts, such as American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), are instruments denominated in foreign currencies. These are issued by a foreign depository against the shares respective companies have deposited with a custodian in India.“The restriction on NRIs is new as they are currently permitted to invest in DRs if they are resident outside India,” said Bhagat. “The permissible holder, including its beneficial owner, will be responsible for complying with this requirement. The impact on existing Indian companies that already have DR programs and intend to issue DRs in future (including to NRIs) also needs to be considered.”The regulator said DRs would be required to be listed on an international exchange of a permissible jurisdiction. The permissible jurisdictions would be notified by the government.The international exchanges would be notified by Sebi from time to time and currently appear to include only Level III programs (public offerings) on the Nasdaq and the NYSE, the main board of the Hong Kong Stock Exchange and GDRs admitted on the London Stock Exchange.Sebi on Thursday said custodians should take voting instructions from DR holders before voting for company resolutions.“Currently, certain DR schemes have a formulation where either the DR holder instructs the depository to vote or if the depository does not receive instructions from the holder, then the DR holder is deemed to have authorized a discretionary proxy to a person designated by the issuer to vote. The Sebi circular appears to restrict such discretionary proxy in favour of the issuer or its management,” Bhagat of S&R Associates said.The regulator also said DR holders would not be included in the list of minimum public shareholders. Lawyers said this is different from the Securities Contracts (Regulation) Rules (SCRR) requirement, which was amended in 2015 to include DR holders with voting rights under the definition of public shareholding.