Foreign Portfolio Investors – FPIs

SEBI has notified the SEBI Foreign Portfolio Regulations, 2014 (FPI Regulations), with effect from 1st June 2014.

The FPI Regulations aim to rationalize and consolidate entry routes of foreign investments made in India by  investors such as Foreign Institutional Investors (FIIs), Sub-Accounts, and Qualified Foreign Investors into a single category.

FPI – Foreign Portfolio Investor

The Term FPI has been defined to mean a person who satisfies the eligibility criteria prescribed under the FPI Regulations and has been registered under these regulations.

FPI Regulations at a glance

  • Designated Depository Participants (and not SEBI) would grant registration to Foreign Portfolio Investors.
  • Registration can be obtained in one of the three categories specified by SEBI
  • Registration granted to a FPI shall be permanent unless suspended or cancelled by SEBI or surrendered by the FPI.
  • Existing FIIs or QFIs shall be deemed to be a FPI till expiry of three years for which fees have been paid under the FII Regulations.
  • An existing FII is permitted to transact in securities till the expiry of its registration as a FII. Post expiry of registration (or earlier), it can obtain a Registration as a FPI by payment of conversion fees.
  • Existing QFIs to obtain Registration as a FPI within one year from 7 January 2014.
  • Investment in equity shares of a company by a single FPI or investor group to be below 10% of the issued capital of the company
  • FPIs are permitted to issue, subscribe or deal in offshore derivative instruments where the same is issued to persons regulated outside India. However, Category III FPI and unregulated broad based funds (classified as Category II FPIs by virtue of their investment manager being appropriately regulated) are not permitted to issue, subscribe or deal in ODIs.

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