INSUBCONTINENT EXCLUSIVE:
New Delhi: Easing the regulatory framework for foreign portfolio investors, Sebi has simplified KYC requirements for them and permitted them
to carry out off-market transfer of securities.
Besides, the regulator has broad-based the classification for foreign portfolio investors
(FPIs) and simplified their registration process.
The notification comes after the board of Sebi in August approved a proposal to simplify
the regulatory norms for FPIs.
The new regulations have been redrafted based on the recommendation of a committee headed by former RBI
deputy governor H R Khan.
Under the new framework, FPIs would be classified into two categories instead of three
At present, Sebi has classified FPIs into three categories with the easier compliance norms for Category-I FPIs and the strictest for
The most well-regulated FPIs come under Category-I.
As per the new rule, the government and government-related investors such as central
banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled or at least 75 per cent
directly or indirectly owned by such government and government related investor; pension and university funds would fall under the
Category-I FPIs.
Besides, appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies,
investment managers, investment advisors, portfolio managers, broker dealers and swap dealers would come under the Category-I.
Sebi said
that Category II FPIs will include all the investors not eligible under Category I foreign portfolio investors such as endowments and
foundations; charitable organisations; corporate bodies; family offices; individuals; appropriately regulated entities investing on behalf
of their client; and unregulated funds in the form of limited partnership and trusts.
The new FPI regulations would come into force with
immediate effect, the Securities and Exchange Board of India (Sebi) said in a notification issued on Monday.
Besides, the regulator has
allowed FPIs to buy or sell shares off-market to any domestic or foreign investor even if the scrip of such a firm is illiquid or suspended
or delisted.
Further, the norms for issuance and subscription of controversial offshore derivative instruments such as participatory notes
or P-notes have also been rationalised.
Sebi said Category I FPIs may issue offshore derivative instruments and these instruments should be
issued "only to persons eligible for registration as Category I FPIs"
Besides, offshore funds floated by mutual funds have been allowed to invest in the country after registration as FPIs.
In 2017, Sebi had
prohibited FPIs from issuing P-notes unless they were meant for hedging risks.
Among others, entities established in the International
Financial Services Centre (IFSC) would be deemed to have met the criteria for FPIs.
To attract more overseas funds into the market, central
banks -- that are not members of the Bank for International Settlements -- would be eligible for registration as FPIs
Besides, registration for multiple investment manager (MIM) structures has been simplified.