Foreign Portfolio Investment Registration With SEBI
Overview of Foreign Portfolio Investment
Foreign Portfolio Investment is generally done by non-resident citizens and foreign investors in the Indian Financial Market. These investments are in securities like government bonds, stocks, corporate bonds, infrastructure securities, convertible securities. The foreign citizens making such investments are referred to by the term “Foreign Portfolio Investors” or FPIs. Such investments have been regulated under the norms and regulations of SEBI 2014 regulations for Foreign Portfolio Investors. These regulations have made it mandatory for foreign investors to get registered with SEBI before investing their capital under the umbrella of Foreign Portfolio Investment.
There are three categories decided by SEBI under which any investor can get himself registered according to the speciality of the category.
Category 1: In this category, all the foreign investors who are related to central banks of other countries, sovereign wealth funds, or government agencies are included. Investors who find themselves from any of the above bodies are required to get registered under this category.
Category 2: This category includes investors from regulated organisations like Asset Management Companies, Banks, Investment Managers, etc. this also includes broad-based funds which are regulated like investment trusts, mutual funds, etc. it might even include managers who maintain the banks, portfolios, pension funds, or any other such funds.
Category 3: This category includes all the foreign investors who do not belong to either category 1 or 2. This might include individual investors, HNI, bonds held by families, bonds held by corporate, etc.
Compliance Requirements for FPIs
SEBI has set compliance norms for all kinds of Foreign investment companies/individuals willing to invest in India. An FPI must comply with the laws set by the board and thus can only operate in the market after taking the registration and license from the board. The FPIs are also required to open bank accounts in their name and also have to open depository accounts for securities.
The FPI investors belonging to category 2 or 3 are required to furnish information about the executives of the company. The information is provided for identifying the individual as the FPI’s Beneficial Owner (BO). The local custodian must be given information regarding the BO.
FPIs can invest in securities that can be transferred like preference shares, derivatives of mutual funds, bonds, etc. although the securities that an FPI can invest in must be registered in the Indian capital market only. For investment in equity security, An FPI can only invest in listed equities of the Indian market. The investment in equity made by a pool of FPI must not exceed 10%. In the case of a private sector bank, the said limit is 5%. For investments of more than 10% in banks will be treated as Foreign Direct Investment (FDI) and will come under the compliance regime and authority of RBI.
Eligibility Criteria to Get FPI Registration from SEBI
1. Its securities market regulator must either be a part of the MOU with SEBI or a signatory of the International Organization of Securities Commissions Multilateral Memorandum of Understanding (MoU).
2. The resident country must not be identified in the public statement of the Financial Action Task Force with issues related to money laundering or terrorism.
3. If the applicant is a bank, then the resident country’s central bank must be a member of the Bank for International Settlement.
Procedure for Foreign Portfolio Registration
Once the certificate for registration has been granted, under the board’s regulations, it will remain permanently valid unless it has been suspended or cancelled by the board or unless it is suspended by the applicant itself.
Documents Required For Foreign Portfolio Investor SEBI Registration
The following documents are required for Depository Participant SEBI Registration:
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Foreign portfolio Investment is generally done by non-resident citizens and foreign investors in the Indian Financial Market. Such investments have been regulated under the norms and regulations of SEBI 2014 regulations for Foreign Portfolio Investors. These investments are in securities like government bonds, stocks, corporate bonds, infrastructure securities, convertible securities.
There are three categories decided by SEBI under which any investor can get himself registered:
Category 1: In this category, all the foreign investors who are related to central banks of other countries, sovereign wealth funds, or government agencies are included.
Category 2: This category includes investors from regulated organisations like Asset Management Companies, Banks, etc. It also includes managers who maintain the banks, portfolios, pension funds, or any other such funds.
Category 3: This category includes all the foreign investors who do not belong to either category 1 or 2.
Its securities market regulator must either be a part of the MOU with SEBI or a signatory of the International Organization of Securities Commissions Multilateral Memorandum of Understanding (MoU). The resident country must not be identified in the public statement of the Financial Action Task Force. If the applicant is a bank, then the resident country’s central bank must be a member of the Bank for International Settlement.
Once the certificate for registration has been granted, under the board’s regulations, it will remain permanently valid for a lifetime. The certificate only loses its validity if the applicant’s license is cancelled by the board due to any non-compliance or the investor itself asks for the suspension of the license.