Thursday November 7 2019
News Source: Global Disclosures
Focus: Foreign Investment
The Securities and Exchange Board of India (SEBI) has published guidelines for foreign Portfolio Investors and Eligible Foreign Investors.
Change in category of FPIs
There has been a change in the category of FPIs. This includes FPIs registered as category III FPIs under the 2014 regulations shall be deemed to have been registered as Category II FPIs under the new regulations.
The process for re-categorisation of FPIs shall be as follows:
- All existing FPIs registered as Category I FPIs under the SEBI (Foreign Portfolio Investors) Regulations, 2014 (2014 Regulations) shall be deemed to have been registered as Category I FPIs under the Regulations
- All existing FPIs registered as Category III FPIs under the 2014 Regulations shall be deemed to have been registered as Category II FPIs under the Regulations.
- There will be no deemed re-categorization of registration for eligible entities from Category III FPI registration under 2014 Regulations to Category I FPI under the Regulations.
- All existing FPIs registered as Category II FPIs under the 2014 Regulations shall be deemed to have been registered either as Category I FPI or Category II FPI under the Regulations as follows:
|Existing Categories as per 2014 Regulations||New Categories as per the Regulations|
|Appropriately regulated broad based funds such as mutual funds, investment trusts, insurance/reinsurance companies;||(i) All Insurance entities – Category I; (ii) Funds from FATF member countries – Category I ; (iii)Funds from non-FATF member countries – Category II|
|Appropriately regulated persons such as banks, asset management companies, investment managers/ advisors, portfolio managers, broker dealers and swap dealers||All are re-categorized as Category I|
|University funds and pension funds||All are re-categorized as Category I|
|University related endowments already registered with the Board as foreign institutional investors or sub-accounts||All are re-categorized as Category I|
|Unregulated funds/entity categorized as Cat II by virtue of Regulated Investment Manager also registered as Category II FPI||Unregulated funds/entity where regulated Investment Manager is from: (i) FATF member country and also registered as Category I FPI – Category I (ii) non-FATF member country – Category II|
Clarification on 10% investment limit
The Operational Guidelines also provides clarification on the adherence to 10% investment limits. In the event an FPI and its investor group reach 10% or more of the total paid up equity capital of a company on a fully diluted basis, they must follow FEMA rules in this regard. If such FPI and its investor group opt to treat their entire investment into a company as FDI under Regulation 22(3), such FPI including its investor group shall not make further portfolio investment in that company under the Regulations. An FPI/its investor group shall inform respective custodians of the choice who in turn will report this to the board, depositories and the issuer. Such investments shall be treated as FDI subject to norms as prescribed by RBI from time to time and will be marked as FDI in the custodian records. However, an FPI and its investor group will be able to sell these securities only through the route as they were acquired and appropriate reporting (i.e. LEC reporting) will be made by the respective custodian.
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