Sebi issues norms for registration of FPI with depositories

Ushering in a new regime for overseas investors as FPIs (Foreign Portfolio Investors), Sebi today issued operating guidelines for depository participants to register these new entities and to ensure that their combined holding in any listed company remains capped at 10 per cent.
The operating guidelines have come a day after Sebi notifying its FPI Regulations, 2014. This new class of investors, FPIs, would encompass all Foreign Institutional Investors (FIIs), their sub-accounts and Qualified Foreign Investors (QFIs).
The Securities and Exchange Board of India (Sebi) approved Designated Depository Participants (DDPs) would grant registration to FPIs on behalf of the regulator and also carry out other allied activities in compliance with regulations.

Each FPI will engage a DDP before making investment in Indian securities market. At all times the DDP and custodian of securities of the FPI will be the same entity, Securities and Exchange Board of India (Sebi) said in a circular.
The investors applying for registration as FPI needs to fill a form comprises informations like name, category of the applicant, name of the country, whether the applicant is 'fit and proper' among others.
In case of an applicant being a bank or its subsidiary, the respective DDP will forward the relevant details of the applicant such as its name and address to Sebi. The regulator would in turn request RBI to provide its comments.

Based on the comments received from RBI, Sebi would intimate the comments of the apex bank to DDP accordingly.

According to Sebi, "the depositories shall ensure that the aggregate holdings of all FPIs belonging to the same investor group should remain below 10 per cent of the paid up capital of the investee company."
In case the aggregate holdings of FPIs belonging to same investor group exceeds 10 per cent limit, depositories will put in place appropriate procedures and mechanism to bring back the holdings within the stipulated investment limit, in a reasonable period of time not exceeding seven days.

Also, the depositories will report the details of those FPIs who are responsible for such breach of investment limit to Sebi, forthwith.
These operational guidelines for DDPs are issued to facilitate implementation of Sebi (FPI) Regulations 2014.
As per the FPI norms, FPIs have been divided into three categories as per their risk profile. The category-I FPIs, which would be the lowest risk entities, would include foreign governments and government related foreign investors.
Category II FPIs would include appropriately regulated broad-based funds, whose investment manager is appropriately regulated, university funds, university-related endowments and pension funds. The Category III FPIs would include all others not eligible under the first two categories.