(1) No person shall buy, sell or otherwise deal in securities as a foreign portfolio investor unless it has obtained a certificate granted by a designated depository participant on behalf of the Board.
Explanation – An offshore fund floated by an asset management company that has received no-objection certificate in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, shall be required to obtain registration as a foreign portfolio investor, for investment in securities in India, within one hundred and eighty days from the date of notification of these regulations.
(2) An application for the grant of certificate as a foreign portfolio investor shall be made to a designated depository participant in the Form specified by the Government or the Board from time to time and shall be supported by the fee specified in Part A of the Second Schedule.
Eligibility criteria of foreign portfolio investor.
4 A designated depository participant shall consider an application for grant of certificate of registration as a foreign portfolio investor if the applicant satisfies the following conditions namely: -
(a) the applicant is not a resident Indian;
(b) the applicant is not a non-resident Indian or an overseas citizen of India;
(c) non-resident Indians or overseas citizens of India or resident Indian individuals can be constituents of the applicant provided they meet conditions specified by the Board from time to time;
(d) the applicant is a resident of the country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with the Board:
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Provided that an applicant being Government or Government related investor shall be considered as eligible for registration, if such applicant is a resident in the country as may be approved by the Government of India;
(e) the applicant being a bank is a resident of a country whose central bank is a member of Bank for International Settlements:
Provided that a central bank applicant need not be a member of Bank for International Settlements;
(f) the applicant or its underlying investors contributing twenty-five per cent or more in the corpus of the applicant or identified on the basis of control, shall not be the person(s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council and is not a resident in the country identified in the public statement of Financial Action Task Force as –
(i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or
(ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies;
(g) the applicant is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;
(h) any other criteria specified by the Board from time to time:
Provided that clause (a), (d) and (e) shall not apply to an applicant incorporated or established in an International Financial Services Centre.
Categories of foreign portfolio investor.
5. An applicant seeking registration as a foreign portfolio investor may apply in one of the categories mentioned hereunder or any other category as may be specified by the Board from time to time –
(a) "Category I foreign portfolio investor" which shall include –
(i) Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled or at least 75% directly or indirectly owned by such Government and Government related investor(s);
(ii) Pension funds and university funds;
(iii)Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers;
(iv) Entities from the Financial Action Task Force member countries which are – Page 5 of 28 I. appropriately regulated funds;
II. unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor:
Provided that the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund;
III. university related endowments of such universities that have been in existence for more than five years;
(v) An entity (A) whose investment manager is from the Financial Action Task Force member country and such an investment manager is registered as a Category I foreign portfolio investor; or (B) which is at least seventy-five per cent owned, directly or indirectly by another entity, eligible under sub-clause
(ii), (iii) and (iv) of clause (a) of this regulation and such an eligible entity is from a Financial Action Task Force member country:
Provided that such an investment manager or eligible entity undertakes the responsibility of all the acts of commission or omission of the applicants seeking registration under this sub-clause.
(b) "Category II foreign portfolio investor" shall include all the investors not eligible under Category I foreign portfolio investors such as –
(i) appropriately regulated funds not eligible as Category-I foreign portfolio investor;
(ii) endowments and foundations;
(iii) charitable organisations;
(iv) corporate bodies;
(v) family offices;
(vi) Individuals;
(vii) appropriately regulated entities investing on behalf of their client, as per conditions specified by the Board from time to time;
(viii) Unregulated funds in the form of limited partnership and trusts;
Explanation: An applicant incorporated or established in an International Financial Services Centre shall be deemed to be appropriately regulated.
Furnishing of information, and personal representation.
6.(1) The Board or the designated depository participant may require the applicant to furnish such further information or clarification as may be considered necessary for the grant of the certificate of registration as a foreign portfolio investor.
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(2) The applicant or his authorised representative shall, if so required by the Board or the designated depository participant, appear before them for personal representation in connection with the grant of a certificate.
Certificate of registration
7.(1) The designated depository participant shall on behalf of the Board grant the certificate of registration, bearing registration number generated by National Securities Depositories Limited, as specified in the First Schedule to an applicant if it is satisfied that the applicant is eligible and fulfils the requirements as specified in these regulations.
(2) The designated depository participant shall endeavour to dispose of the application for grant of certificate of registration as soon as possible but not later than thirty days after receipt of application by the designated depository participant, or after the information called for under regulation 6 has been furnished; whichever is later.
(3) Upon grant of certificate of registration to the applicant, the designated depository participant shall remit the fees, as specified in Part A of the Second Schedule, received from the applicant to the Board.
(4) If an applicant seeking registration as a foreign portfolio investor has any grievance with respect to its application or if the designated depository participant has any question in respect of interpretation of any provision of this regulation, it may approach the Board for appropriate instructions.
(5) The foreign portfolio investor needs to have a valid registration as long as it is holding securities or derivatives in India:
Provided that a foreign portfolio investor whose registration is not valid and who is holding securities or derivatives in India shall be allowed to sell such securities or wind up their open position in derivatives within one year from the date of publication of these regulations.
Application to conform to the requirements 8 (1) An application for grant of certificate of registration to act as a foreign portfolio investor, which is not complete in all respects or is false or misleading in any material particular or does not satisfy the requirements specified in these regulations shall be deemed to be deficient and liable to be rejected by the designated depository participant:
Provided that before rejecting any such application, the applicant shall be given a reasonable opportunity of being heard and to remove the deficiency, within the time as specified by the designated depository participant.
(2) The decision to reject the application shall be communicated by the designated depository participant to the applicant in writing indicating the grounds for rejection of the application.
(3) The applicant, who is aggrieved by the decision of the designated depository participant under sub-regulation (1) may, within a period of thirty days from the date of receipt of Page 7 of 28 communication under sub-regulation (2), apply to the Board for reconsideration of the decision of the designated depository participant:
Provided that such application for reconsideration shall not be considered by the Board where the rejection was on account of technical reasons such as non-submission of complete information, documents, including non-payment of specified fees.
(4) The Board shall, as soon as possible, after considering the submissions made in the application seeking reconsideration made under sub-regulation (3) and after giving a reasonable opportunity of being heard, communicate its decision in writing to the applicant.
Suspension, cancellation or surrender of certificate.