Foreign Portfolio Investment SEBI

Foreign Portfolio Investment SEBI

What is Foreign Portfolio Investment

Foreign Portfolio investment is an investment by non-residents, in Indian securities like shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. The investors who are making investment are known as Foreign Portfolio investors. It has been regulated under the framework of SEBI. SEBI has specifically designed the regulations SEBI (Foreign Portfolio Investors) Regulations,2014 under which it is mandatory to get registered before making any foreign Portfolio Investment.

Investors are required to be registered in any of the classified categories as described below:

Category 1 – It includes foreign investors, which are related with the government such as central banks, government agencies, sovereign wealth funds;

Category II– It includes regulated entities like banks, Assets Management Companies, Investment Managers etc. and in case of broad-based funds, which may be regulated such as mutual funds, investment trusts etc. or non-regulated;

Category III– It includes those investors, which are not covered under categories I and II

Procedure for registration of Foreign Portfolio Investors:

STEP-1 The applicant has to apply to the Designated depository participant in Form A along with the prescribed fees.

STEP-2 An investor who is seeking, to invest in Indian Market should comply with the following qualification:

  1. The applicant should be non- resident in India. Moreover, he should be a resident of a country which meets the following criteria- (i) its securities market regulator should be a  signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding or party to an MOU with SEBI; (ii) in case if, the applicant is a bank then their central bank should be a member of the Bank for International Settlement; and (iii) should not be a resident in a country which is identified in the public statement of Financial Action Task Force having issues related to terrorism or money laundering.
  2. Applicant should be legally authorized to invest outside the country of incorporation or place of business and as per its Memorandum of Association and Articles of Association or any other equivalent document in securities.

Step -3 After receiving application, the Board or the designated depository participant if required, then inform the applicant to furnish such further information/clarification or even appear themselves before the board or designated depository participant. They can also reject the application, if not satisfied with the content. Before rejecting any application, an opportunity of being heard is given.

STEP -4 If designated depository participant is satisfied with the application, then they can grant certificate of registration in Form B of First Schedule, after collecting the prescribed fees and remit the same to the board. They dispose of the application not later than thirty days after receipt of or, after the information further furnished, whichever is later.

STEP-6 Once the certificate has been granted, under these regulations, it will remain permanent unless it has been suspended or canceled by the board or unless it is suspended by the applicant itself.

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