Eligibility conditions for Foreign Portfolio Investors (FPIs)
Summary
This circular establishes new eligibility norms for Foreign Portfolio Investors (FPIs) regarding constituents who are Non-Resident Indians, Overseas Citizens of India, or Resident Indians. It mandates that contributions from these individuals must remain below 25% individually and 50% in aggregate to the FPI's corpus. The document also outlines specific exemptions for offshore funds and mutual fund-only investors, along with compliance timelines.
Text
Beneficial ownership criteria in Prevention of Money-laundering (Maintenance of Records) Rules, 2005 should be made applicable for purpose of KYC and not for determining eligibility of FPIs. The clubbing of investment limit for FPIs should not be done on the basis of beneficial owner (BO) as per PMLA Rules.
Non Resident Indians (NRIs) and Overseas Citizens of India (OCIs) shall have the same meaning as assigned to them under regulation 2 of the Foreign Exchange Management (Transfer or issue of security by a Person Resident outside India) Regulations, 2017.
Contributions by NRI/ OCI/ RI including those of NRI/ OCI/ RI controlled Investment Manager should be below 25% from a single NRI/ OCI/ RI and in aggregate should be below 50% to corpus of FPI.
Resident Indian’s contribution permitted is that made through Liberalised Remittance Scheme (LRS) approved by Reserve Bank of India in global funds whose Indian exposure is less than 50%.
NRI/ OCI/ RI should not be in control of FPI.
FPIs can be controlled by investment managers (IMs) which are controlled and /or owned by NRI/ OCI/ RI if following conditions are satisfied: i. IM is appropriately regulated in its home jurisdiction and registers itself with SEBI as non-investing FPI; or ii. IM is incorporated or setup under Indian laws and appropriately registered with SEBI.
A non-investing FPI may be directly or indirectly fully owned and/ or controlled by a NRI/ OCI/ RI.
The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs which are ‘offshore funds’ for which no-objection certificate has been provided by the Board in terms of SEBI (Mutual Funds) Regulations, 1996.
These restrictions in regard to eligibility conditions (viz. referred at para 2.2 above) will not be applicable to FPIs investing only in mutual funds in India.
Existing FPIs and new applicants shall be given a time period of two years from the date of coming into force of the amended regulations or from the date of registration, whichever is later in order to satisfy these eligibility conditions.
In case of temporary breach, a time period of 90 days will be given to ensure compliance with above conditions.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Eligibility conditions for Foreign Portfolio Investors (FPIs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.