The Securities and Exchange Board of India (SEBI) released the report of a working group on Foreign Portfolio Investment (FPI) regulations for public comments on 24 May 2019.
The working group was mandated to revamp and redraft the SEBI (FPI) Regulations 2014 to incorporate various circulars, FAQs and operational guidelines issued over the last four years and to simplify, rationalise and liberalise the Regulations. The Report discusses and makes recommendations on the FPI Registration Process, KYC and simplification of documentation, investment permissions amongst other aspects. Basis the recommendations, proposed SEBI (FPI) Regulations and proposed Operating Guidelines were also prepared as part of the Report.
Based on the Report of the working group, SEBI approved certain amendments to the FPI Regulations in its Board meeting on 21 August 2019. These include, removing the broad based eligibility criteria for FIIs, re-categorization of FPIs into two categories instead of three, central banks that are not members of the Bank for International Settlement are eligible for FPI registration, entities established in IFSC will be deemed to have met the jurisdiction criteria for FPIs. Further, it also approved the simplification of KYC documentation, off market transfer of unlisted, suspended or illiquid securities to domestic or foreign investors by FPIs. Offshore funds floated by Mutual Funds have been permitted to invest in India post registration as FPI. The issuance and subscription of Offshore Derivative Instruments has also been rationalised.
The progressive approach taken by SEBI in terms of inviting recommendations from a working group to review the FPI regulations and thereafter acting on such recommendations is welcome and much appreciated. The key focus of such working group to simplify and liberalise the registration and KYC norms was a much needed change that has been approved by the SEBI. While the consequent amendments to the FPI regulations are awaited, we believe that such reforms to the FPI Regulations would only further the interest of and attract foreign investors.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that: