QFIs exempted from paying fees to convert to FPI structure

All existing FIIs and their sub-accounts are required to pay $1,000 to obtain registration certificate to act as an FPI

Foreign investors registered with Sebi as Qualified Foreign Investors would be exempted from any fee for converting themselves into FPIs, a unified structure for all overseas entities investing in the Indian markets.

This has been communicated by capital markets regulator Sebi as part of a detailed note on the new overseas investor regime, which came into force last month and all existing foreign investors would eventually need to adopt this FPI (Foreign Portfolio Investor) structure.

All existing Foreign Institutional Investors (FIIs) and their sub-accounts are required to pay USD 1,000 to obtain registration certificate to act as an FPI. While FII structure has been in place since 1991, Sebi had introduced the concept of QFIs for select overseas investors in August 2011.

Now, FPI has been created as an unified class for all kinds of overseas entities investing in domestic capital markets and it would subsume all existing categories like FIIs and their sub-accounts.

"As per the Regulations only FII or sub-accounts are required to pay the conversion fees of USD 1000 on or before the expiry of their registration. QFIs are not required to pay any conversion fees in terms of the Regulations," the Securities and Exchange Board of India (Sebi) said in its latest update.

Under the new norms, Sebi approved depository participants would grant registration to FPIs on behalf of the regulator and carry out other allied activities in compliance with regulations.

According to the norms, the existing QFIs may continue to buy, sell or deal in securities till January 6, 2015 or until it obtains a certificate of registration as FPI, whichever is earlier.

The new regime divides FPIs into three categories as per their risk profile and the know-your customer requirements.

The category-I FPIs is the lowest risk segment that include foreign governments and government-related foreign investors.

Category-II FPIs include appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds, university related endowments and pension funds, etc.

Category-III FPIs include all others not eligible under the first two categories.

FPI regulations have been put in place to make an easier registration process and operating framework for overseas entities seeking to invest in the capital markets.