In order to harmonize the various available routes for foreign portfolio investment in India, the Indian securities market regulator i.e. Securities Exchange Board of India (“SEBI”) has introduced a new class of foreign investors in India known as the Foreign Portfolio Investors (“FPIs”) with the aim to simplify the overall operation foreign portfolio investments in India.
Foreign Portfolio Investment refers to investment in financial assets such as stocks or bonds in a foreign country.
To facilitate the registration process of the FPI with the SEBI under the FPI Regulations, duly licensed designated depository participants (“DDPs”) have been assigned the responsibility to coordinate all applications and communications between the applicant and the authority.
The applicant should meet the following criteria to be eligible for the FPI licence:
- be a resident in a country other than India whose securities market regulator is a signatory to the International Organisation of the Securities Commission’s Multilateral Memorandum of Understanding or a signatory to a Bilateral Memorandum of Understanding with the SEBI;
- not be a non-resident Indian;
- in case of a bank, the latter should be resident of a country whose central bank is a member of the Bank for International Settlements;
- be legally permitted to invest in securities outside the country of its incorporation or establishment or place of business;
- be authorised to invest on its own behalf or on behalf of its clients; and
- have sufficient experience, good track record, be professionally competent, financially sound and have a generally good reputation of fairness and integrity.
The basic rule to grant a certificate to the applicant lies in the interest of the development of the securities market. The FPI Licence is valid for a block of 3 years upon expiry of which it has to be renewed against settlement of a fee to the SEBI.
The following category of investors are eligible to register as FPIs:
- Category I – Government and Government related investors such as Central Banks, Governmental agencies, sovereign wealth funds, international/ multilateral organisations/ agencies.
- Category II - Appropriately regulated broad based funds such as mutual funds, investment trusts, insurance/ reinsurance companies, appropriately regulated persons such as banks, asset management companies, investment managers/ advisors, portfolio managers, broad based funds that are not appropriately regulated whose investment manager is appropriately regulated, university funds and pension funds as well as university related endowments already registered with SEBI as FII/ sub-account. The investment manager(s) of unregulated broad-based funds should first register themselves as Category II FPI and must undertake that they shall be responsible and liable for all acts of commission and omission of all its underlying broad-based funds and other deeds and things done by such broad-based funds under these regulations.
- Category III - All other FPIs not eligible under Category I and II such as Endowments, Charitable Societies/ Trust, Foundations, Corporate Bodies, Trusts, Individuals, Family Offices, etc.
Every FPI must appoint a compliance officer to monitor its adherence with relevant laws and is permitted to transact only in instruments prescribed by the SEBI and RBI.
HOW MITCO CAN HELP?
- Assistance to prospective applicants to coordinate for Board approval;
- Assistance for the selection and appointment of the DDP
- Assistance for the classification of the category of the FPI
- Assistance for the registration process including settlement of fees, preparation of application forms, notarization of supporting documents, follow up and retrieval of the FPI Licence, statutory filings on FPIs with Indian authorities and all related requests.
For more information, please contact:
Your relationship manager at MITCO or the Business Development Team by email firstname.lastname@example.org or phone them on + 230 404 8000.