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Foreign Portfolio Investment SEBI

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What does Foreign Portfolio Investment mean?

Foreign Portfolio Investment includes investment in the international assets which is considered as a non-resident transaction in Indian securities such as equity, government bonds, corporate bonds, convertible securities, securities in infrastructure, etc. Creditors make contributions are classified as creditors in the international portfolio. It was governed within the SEBI system. SEBI has specifically designed the SEBI (Foreign Portfolio Investors) Regulations, 2014, which require registration before creating any foreign investment portfolio.

Below mentioned categories are defined for investors in order to obtain the registration:

Category 1 - This involves foreign investors, such as central banks, government agencies, sovereign wealth funds, linked to finance;

Category II– This covers licensed firms, such as banks, asset management agencies, investment managers, etc., and in the case of broad-based securities, which can be controlled or unregulated, such as mutual funds, investment trusts, etc.

Category III- This requires creditors not protected by categories I and II

What are the steps defined for Foreign Portfolio Investment?

Step-1 The claimant will report together with the approved fees to the Designated Depository Member in Form A.

Step-2 An investor wanting to invest in the Indian market should be eligible as follows:

  1. The claimant should be an Indian non-resident. He should also be a citizen of a nation that satisfies the following criteria. (i)The stock market regulator should be a signatory to the Multilateral Memorandum of Understanding of the International Stock Commission or a participant of the MOU with SEBI; (ii)  If the claimant is a bank, the Bank for International Settlement should be a member of its central bank ;and (iii)  Should not be a citizen of a nation listed in the Financial Action Task Force's public statement of concerns of extremism or money laundering.
  2. Applicants should be legally authorized to invest in shares outside the country of origin or place of business and in conjunction with their Agreement Memorandum and Articles of Association or any other comparable document.

Step -3 On receipt of the applications, the board or the designated depository participant shall require the claimant to provide such additional information / clearance or even appear before the board or the designated depository participant. We can also refuse the question, unless we are satisfied with the details. There is an opportunity to be considered when any request is rejected.

Step-4 If the approved applicant in the depository is pleased with the submission, they may issue the registration certificate in Form B of First Schedule after collecting the specified fees and submitting the same to the board. They dispose of the application no later than thirty days after receipt, or after further furnishing of the material, whichever is later.

Step-6 Under these rules, once the credential has been issued, it will remain permanent unless it has been revoked or terminated by the board or the claimant itself has withdrawn it.

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