Securities and Exchange Board of India (SEBI) has amended the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 (FPI Regulations) allowing Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Resident Individuals (RIs) to contribute up to 100% (hundred percent) of the corpus of foreign portfolio investors (FPIs) set up in International Financial Services Centre (IFSC).
The amendments to the FPI Regulations were supplemented by SEBI’s circular dated June 27, 2024 (SEBI Circular) which lays down the conditions required to be fulfilled by FPIs based out of the IFSC and regulated by the International Financial Services Centres Authority (IFSCA).
Key highlights:
- In terms of the SEBI Circular, FPI applicants are required to provide a declaration to the effect that they intend to avail more than 50% (fifty percent) contributions in their corpus from NRIs/OCIs/RIs. Existing FPIs are allowed to comply with this requirement within 6 (six) months from the date of issue of the SEBI Circular.
- FPIs are required to submit copies of PAN of the NRI/OCI/RI contributors along with details of such investors’ economic interest in the corpus of the concerned FPI.
- In the case of non-individual constituents controlled by NRIs/OCIs/RIs, or where these individual investors hold 50% (fifty percent) or more ownership/economic interest (in aggregate), an FPI is required to submit PAN or suitable declarations and identity documentation of such NRIs/OCIs/RIs accompanied with details of the percentage of ownership/economic interest held by such investors in the non-individual constituents and the FPI.
- FPIs based out of the IFSC are exempt from the requirement of providing of PAN details and other necessary documents as mentioned above if the following conditions are met:
(i) Contributions of all investors as statutorily required, are pooled into one investment vehicle registered as a FPI with SEB.
(ii) The corpus of the FPI is a common pool without any segregated portfolios and all investors of the FPI have pari-passu and pro-rata rights that is, they are entitled to receive returns in proportion to their contributions.
(iii) At any given point of time, a total of 20% (twenty percent) of the corpus of the FPI can be invested into equity of a single listed investee company. A period of 3 (three) months has been provided to the applicants/investment managers/fund managers to (i) comply with this requirement if not already complied with at the time of registration; and (ii) rectify a passive breach of this requirement after registration.
(iv) FPIs required to have a minimum of 20 (twenty) investors at any given time with each investor contributing not more than 25% (twenty-five percent) of the corpus of the FPI. A period of 3 (three) months has been provided to the applicants/investment managers/fund managers to (i) comply with this requirement if not already complied with at the time of registration; and (ii) rectify a passive breach of this requirement after registration.
(v) Independence in investment decisions taken by the investment managers/fund managers should be ensured.
Conclusion
Combined efforts from SEBI and IFSCA are likely to increase participation from NRIs and OCIs in the securities market through FPIs.