In pursuance to the recommendations of the working group constituted by SEBI viz. Dr. Harun Khan and its report; the SEBI has rolled out new Foreign Portfolio Investors (FPI) Regulations 2019. The new Regulations have superseded the old Regulations pertaining to FPIs 2014. The new Regulations have refreshed and consolidated the regulatory regime for the FPIs.
The prime changes brought forth by these New Regulations are:
- Eligibilityfor Registration as FPI
Companies incorporated in the international financial services centre (IFSC) are deemed fit to meet the criteria to register as FPI.
- FPI Categories
Provides for two categories viz. Category I i.e. low risk investors such as government entities and government related investors and Category II i.e. medium risk investors and less regulated. There are certain entities which are added in Category I, which are as follows:
- pension funds
- university funds;
- insurance or reinsurance entities, portfolio managers, banks, investment managers, asset management companies, investment advisors, broker dealers and swap dealers;
- Financial Action Task Force member countries’ entities if appropriately regulated or unregulated funds whose investment manager is regulated and registered
- an entity with:
- investment manager from FATF member nation and is registered as category I FPI
- atleast 75% owned by another entity eligible for registration from a FATF member
- Restrictions on Investment
The FPIs in category II that are well regulated funds or investors not eligible under category I FPIs such as endowments and foundations;
- charitable organizations
- corporate bodies
- family offices and individuals
- regulated entities for their client
- unregulated funds which are limited partnership and trusts.
Furthermore, the Regulations requires that the offshore funds by Indian mutual funds which seek to invest in India’s securities market to be registered first
- Obligations of FPI
The Regulations have revised the investment range of a FPI or its group to 10% of total paid-up equity capital that is fully diluted from 10% of the total issued capital of the company, bringing it in consonance with Reserve Bank of India Regulations.
With overhaul of changes in FPI Regulations, the registration process for FPIs have been expedited as well as simplified. The reduction and harmonization of regulations is to give fillip to foreign portfolio investments in India.
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