SEBI constituted panel suggested significant changes to FPI Regulations

Securities and Exchange Board of India (SEBI) constituted panel suggested significant changes to Foreign Portfolio Investors (FPI) Regulations including simplified registration requirements for certain categories and barring entities that fail to furnish beneficial ownership details. It has sought the comments from the public on this regard till June 14, 2019.

Key Points:

• The working group on SEBI (Foreign Portfolio Investors) Regulations, 2014 headed by former RBI deputy governor R Khan after consultations with various stakeholders had submitted the report.
• Through its recommendations, it has set for liberalized investment cap, review of prohibited sectors for foreign investment for FPIs by permitting them for off-market transactions and review of restriction on sovereign wealth funds for investment in corporate debt securities.
• It has suggested liberalization of norms and simplified registration requirement for those FPIs coming under category III which consists of individuals, family offices and hedge funds.
• It has decided to remove ‘opaque structure’ definition for FPIs. They need to provide BO (Beneficial Ownership) details and those who fail to provide BO details including on account of bearer shares cannot deal in SEBI.
• FPIs will be allowed to invest up to applicable sectoral limit on an aggregate basis after adjusting for investments made directly or indirectly under the FDI route. Indian companies will be permitted to decrease the aggregate limit to 24% or 49% or 74% with the approval of the Board of Directors and General Body of the company through a resolution.
• It has suggested simplified registration for Multiple Investment Manager (MIM) structures and take into account the pension fund under category I FPI.
• Other recommendations include entities majorly owned by investors eligible for category I FPI registration to be deemed as category I, separate registration for sub-funds of a fund with segregated portfolio, alignment between FPI and Alternative Investment Fund (AIF) routes and strengthening of Offshore Derivative Instruments (ODIs).

About SEBI:
♦ Founded: April 12, 1992
♦ Headquarters: Mumbai
♦ Chairman: Ajay Tyagi