A Guide to the SEBI Foreign Portfolio Investors Regulations, 2019

A Guide to the SEBI Foreign Portfolio Investors Regulations, 2019

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The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 have been enacted to provide the procedures and rules related to foreign portfolio investors.

Brief History of the Regulations

The Securities and Exchange Board of India (SEBI) has notified the SEBI (Foreign Portfolio Investors) Regulations, 2019 through Notification No. SEBI/LAD-NRO/GN/2019/36 dated 23rd September, 2019 by powers given under Sections 11, 12 and 30 of the SEBI Act, 1992 and Section 25 of the Depositories Act, 1996.

Amendment
SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2019

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Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019


1. Important Definitions

Appropriately Regulated Entity means an entity which is regulated by the securities market regulator or the banking regulator of home jurisdiction or otherwise, in the same capacity in which it proposes to make investments in India.

Bilateral Memorandum of Understanding with the Board means a bilateral Memorandum of Understanding between the Board and any authority outside India that provides for information sharing arrangement.

Certificate means a certificate of registration granted to a foreign portfolio investor by the designated depository participant on behalf of the Board under these regulations.

Control includes the right to appoint a majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Designated Bank means a scheduled bank in India, which has been authorised by the Reserve Bank of India to act as a banker to foreign portfolio investors.

Designated Depository Participant means a person who has been approved by the Board under these regulations.

Foreign Portfolio Investor means a person who has been registered under these regulations and is deemed to be an intermediary in terms of the provisions of the Act.

International Financial Services Centre (IFSC) has the same meaning as assigned to it under the Special Economic Zones Act, 2005. 

Investment Manager includes an entity performing the role of investment management or any equivalent role, including that of a trustee.

Non Resident Indian or Overseas Citizen of India has the same meaning as assigned to it under the Foreign Exchange Management (Non- Debt Instruments) Rules, 2019 made under the Foreign Exchange Management Act, 1999.

Offshore Derivative Instrument means any instrument, by whatever name called, which is issued overseas by a foreign portfolio investor against securities held by it in India, as its underlying.

Resident Indian has the same meaning assigned to the phrase “person resident in India” defined under the Foreign Exchange Management Act, 1999.

Stock Exchange means a recognised stock exchange under the Securities Contracts (Regulation) Act, 1956. 


2. Registration of Foreign Portfolio Investors

2.1 General

  1. No person can 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. An offshore fund floated by an asset management company that has received no-objection certificate in accordance with the SEBI (Mutual Funds) Regulations, 1996, is also required to obtain registration as a foreign portfolio investor, for investment in securities in India, within 180 days from the date of notification of these regulations.
  2. An application for the grant of certificate as a foreign portfolio investor has to be made to a designated depository participant in the Form specified by the Government or the Board from time to time and has to be supported by the fee specified in Part A of the Second Schedule.
  3. 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.
  4. The applicant or his authorised representative has to, 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.
  5. The designated depository participant has to, 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.
  6. The designated depository participant has to endeavour to dispose of the application for grant of certificate of registration as soon as possible but not later than 30 days after receipt of application by the designated depository participant.
  7. Upon grant of certificate of registration to the applicant, the designated depository participant has to remit the fees, as specified in Part A of the Second Schedule, received from the applicant to the Board.
  8. 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.
  9. The foreign portfolio investor needs to have a valid registration as long as it is holding securities or derivatives in India. 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.
  10. 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 has to be deemed to be deficient and liable to be rejected by the designated depository participant. Before rejecting any such application, the applicant has to be given a reasonable opportunity of being heard and to remove the deficiency, within the time as specified by the designated depository participant.
  11. The decision to reject the application has to be communicated by the designated depository participant to the applicant in writing indicating the grounds for rejection of the application.
  12. The applicant, who is aggrieved by the decision of the designated depository participant may, within a period of 30 days from the date of receipt of communication, apply to the Board for reconsideration of the decision of the designated depository participant. Such application for reconsideration cannot 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.
  13. The Board has to, as soon as possible, after considering the submissions made in the application seeking reconsideration made and after giving a reasonable opportunity of being heard, communicate its decision in writing to the applicant.
  14. Subject to the compliance with the provisions of the Act, these regulations and the circulars issued thereunder, the registration granted by the designated depository participant on behalf of the Board under these regulations has to be permanent unless suspended or cancelled by the Board or surrendered by the foreign portfolio investor.
  15. When the foreign portfolio investor fails to pay the required fees for continuance of registration within the specified due date and such foreign portfolio investor does not have any cash or security or derivative position in India, such foreign portfolio investor is deemed to have applied for surrender of its registration and the designated depository participant of such foreign portfolio investor has to process the surrender after obtaining the approval from the Board.
  16. Any foreign portfolio investor desirous of surrendering the certificate of registration may request for such surrender to the designated depository participant who has to accept the surrender of the certificate of registration after obtaining approval from the Board.
  17. While accepting the surrender of registration, the designated depository participant may impose such conditions as may be specified by the Board.

2.2 Eligibility Criteria of Foreign Portfolio Investors

  1. The applicant cannot be a resident Indian.
  2. The applicant cannot be a non-resident Indian or an overseas citizen of India.
  3. 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.
  4. The applicant is a resident of the country whose securities market regulator is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with the Board. An applicant being Government or Government related investor has to be considered as eligible for registration, if such applicant is a resident in the country as may be approved by the Government of India.
  5. The applicant being a bank is a resident of a country whose central bank is a member of Bank for International Settlements.
  6. The applicant or its underlying investors contributing 25% or more in the corpus of the applicant or identified on the basis of control, cannot be the persons 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 a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply or 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.
  7. The applicant is a fit and proper person based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008.
  8. Any other criteria specified by the Board from time to time.

2.3 Categories of Foreign Portfolio Investors

  1. Category I foreign portfolio investor includes 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 investorspension funds and university funds, appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers, entities from the Financial Action Task Force member countries which are appropriately regulated funds, unregulated funds whose investment manager is appropriately regulated and registered as a Category I foreign portfolio investor, university related endowments of such universities that have been in existence for more than 5 years, an entity 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 which is at least 75% owned, directly or indirectly by another entity, eligible under these regulations and such an eligible entity is from a Financial Action Task Force member country.
  2. Category II foreign portfolio investor includes all the investors not eligible under Category I foreign portfolio investors such as appropriately regulated funds not eligible as Category I foreign portfolio investor, endowments and foundations, charitable organisations, corporate bodies, family offices, individuals, appropriately regulated entities investing on behalf of their client, as per conditions specified by the Board from time to time and unregulated funds in the form of limited partnership and trusts.

3. Procedure for Approval of Designated Depository Participant

  1. No person can act as a designated depository participant unless it has obtained the approval of the Board.
  2. An application for approval to act as a designated depository participant has to be made to the Board through a depository with which the applicant has an agreement to act as a participant and has to be accompanied by the application fee specified in Part B of the Second Schedule which has to be paid in the manner specified there.
  3. The depository has to forward the application to the Board, as early as possible, but not later than 30 days from the date of its receipt by the depository, along with its recommendations and after certifying that the participant has complied with the eligibility criteria as provided for in these regulations.
  4. The Board cannot consider an application for the grant of approval as designated depository participant unless the applicant satisfies the following conditions that the applicant is a registered depository participant under the SEBI (Depositories and Participants) Regulations, 1996, the applicant is a registered Custodian under the SEBI (Custodian) Regulations, 1996, the applicant is an Authorised Dealer Category-1 bank authorised by the Reserve Bank of India under the Foreign Exchange Management Act, 1999, the applicant has a multinational presence, either through its branches or through agency relationships with overseas intermediaries regulated in their respective home jurisdictions, the applicant has systems and procedures to comply with the requirements of the Financial Action Task Force Standards, Prevention of Money Laundering Act, 2002, Rules prescribed thereunder and the circulars issued from time to time by the Board, the applicant is a fit and proper person based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008 and any other criteria as may be specified by the Board from time to time.
  5. Irrespective of what is specified above, the Board may consider an application from an entity, regulated in India or in its home jurisdiction, for grant of approval to act as designated depository participant, upon being satisfied that the applicant has sufficient experience in providing custodial services and that the grant of such approval is in the interest of the development of the securities market.
  6. The Board may require the applicant or the depository of which the applicant is a participant to furnish such further information or clarification as may be considered necessary for grant of approval to act as a designated depository participant.
  7. The applicant or its authorised representative has to, if so required by the Board, appear before it for personal representation in connection with the grant of approval.
  8. After considering the application made, the Board may grant approval to the applicant, upon being satisfied that the applicant is eligible and fulfils the requirements as specified in these regulations including payment of fees as specified in Part B of the Second Schedule.
  9. The Board has to dispose of the application for grant of approval as soon as possible but not later than 30 days after receipt of application by the Board or, after all the information called for has been furnished, whichever is later.
  10. An application for grant of approval to act as designated depository participant which is not complete in all respects or is false or misleading in any material particular, will deem to be treated as deficient and has to be liable to be rejected by the Board. Before rejecting any such application, the applicant has to be given a reasonable opportunity to remove the deficiency, within the time as specified by the Board.
  11. Where an application for grant of an approval does not satisfy the requirements specified in these regulations, the Board may reject the application after giving the applicant a reasonable opportunity of being heard.
  12. The decision to reject the application has to be communicated by the Board to the applicant in writing stating therein the grounds on which the application has been rejected.
  13. The applicant, who is aggrieved by the decision of the Board may, within a period of 30 days from the date of receipt of communication, apply to the Board for reconsideration of its decision.
  14. The Board has to, as soon as possible, in light of the submissions made in the application for reconsideration made and after giving a reasonable opportunity of being heard, convey its decision in writing to the applicant.
  15. Subject to the compliance with the provisions of the Act, these regulations and the circulars issued thereunder, the approval granted by the Board under these regulations are permanent unless suspended or withdrawn by the Board or surrendered by the designated depository participant.
  16. Where any designated depository participant who has been granted approval under these regulations fails to comply with any conditions subject to which an approval has been granted to him under these regulations or contravenes any of the provisions of the securities laws or directions, instructions or circulars issued thereunder, the Board may, without prejudice to any action under the securities laws or directions, instructions or circulars issued thereunder, by an order suspend or withdraw such approval after providing the designated depository participant a reasonable opportunity of being heard.
  17. Any designated depository participant, who has been granted approval under these regulations, desirous of surrendering the approval granted, may make a request for such surrender to the Board.
  18. While accepting the surrender, the Board may impose such conditions as it deems fit for the protection of investors or the clients of the designated depository participant or the securities market and such person has to comply with such conditions.

4. Investment Restrictions

  1. A foreign portfolio investor has to invest only in the following securities which include shares, debentures and warrants issued by a body corporate, listed or to be listed on a recognized stock exchange in India, units of schemes launched by mutual funds under the SEBI (Mutual Fund) Regulations, 1996, units of schemes floated by a Collective Investment Scheme in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, derivatives traded on a recognized stock exchange, units of real estate investment trusts, infrastructure investment trusts and units of Category III Alternative Investment Funds registered with the BoardIndian depository receipts, any debt securities or other instruments as permitted by the Reserve Bank of India for foreign portfolio investors to invest in from time to time and such other instruments as specified by the Board from time to time.
  2. Where a foreign portfolio investor, prior to commencement of these regulations, holds equity shares in a company whose shares are not listed on any recognised stock exchange, and continues to hold such shares after the initial public offering and listing thereof, such shares are subject to lock-in for the same period, if any, as is applicable to shares held by a foreign direct investor placed in similar position, under the policy of the Government of India relating to foreign direct investment for the time being in force.
  3. In respect of investments in the secondary market, the following additional conditions apply including that a foreign portfolio investor has to transact in the securities in India only on the basis of taking and giving delivery of securities purchased or sold, any transactions in derivatives on a recognized stock exchange do not apply, short selling transactions in accordance with the framework specified by the Board do not apply, any transaction in securities pursuant to an agreement entered into with the merchant banker in the process of market making or subscribing to unsubscribed portion of the issue under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 do not apply and any other transaction specified by the Board will not apply.
  4. In respect of investments in the debt securities, the foreign portfolio investors have to also comply with terms, conditions or directions, specified or issued by the Board or Reserve Bank of India, from time to time, in addition to other conditions specified in these regulations.
  5. Unless otherwise approved by the Board, securities have to be registered in the name of the foreign portfolio investor as a beneficial owner as defined under the Depositories Act, 1996.
  6. The purchase of equity shares of each company by a single foreign portfolio investor including its investor group has to be below 10% of the total paid-up equity capital on a fully diluted basis of the company. Where the total investment under these regulations by a foreign portfolio investor including its investor group exceeds the threshold of below 10% of the total paid up equity capital in a listed or to be listed company on a fully diluted basis, the foreign portfolio investor has to divest the excess holding within 5 trading days from the date of settlement of the trades resulting in the breach. In case the foreign portfolio investor fails to divest the excess holding, the entire investment in the company by such foreign portfolio investor including its investor group has to be considered as investment under the Foreign Direct Investment, as per the procedure specified by the Board and the foreign portfolio investor and its investor group cannot make further portfolio investment in that company under these regulations.
  7. An entity, registered as a foreign portfolio investor is permitted to invest in Indian securities as a person resident outside India in accordance with provisions of the Foreign Exchange Management Act, 1999, rules and regulations made thereunder.
  8. A foreign portfolio investor may lend or borrow securities in accordance with the framework specified by the Board in this regard.
  9. The investment by the foreign portfolio investor is also subject to such other conditions and restrictions as may be specified by the Government of India from time to time.

5. Conditions for Issuance of Offshore Derivative Instruments

  1. No foreign portfolio investor may issue, subscribe to or otherwise deal in offshore derivative instruments, directly or indirectly, unless the following conditions are satisfied which include that such offshore derivative instruments are issued only by persons registered as Category I foreign portfolio investors, such offshore derivative instruments are issued only to persons eligible for registration as Category I foreign portfolio investors, such offshore derivative instruments are issued after compliance with the ‘know your client’ norms as specified by the Board and such other conditions as may be specified by the Board from time to time.
  2. A foreign portfolio investor has to ensure that any transfer of offshore derivative instruments issued by or on behalf of it, is subject to the following conditions that such offshore derivative instruments are transferred to persons as specified above and prior consent of the foreign portfolio investor is obtained for such transfer, except in cases, where the persons to whom the offshore derivative instruments are to be transferred, are pre-approved by the foreign portfolio investor.
  3. A foreign portfolio investor has to fully disclose to the Board, any information concerning the terms of and parties to off-shore derivative instruments, by whatever names they are called, entered into by it relating to any securities listed or proposed to be listed in any stock exchange in India, as and when and in such form as the Board may specify.
  4. A foreign portfolio investor has to collect the regulatory fee, as specified in Part C of the Second Schedule, from every subscriber of the offshore derivative instrument issued by it and deposit the same with the Board.

6. General Obligations and Responsibilities of Foreign Portfolio Investors

  1. The foreign portfolio investor has to comply with the provisions of these regulations, as far as they may apply, circulars issued thereunder and any other terms and conditions specified by the Board from time to time.
  2. The foreign portfolio investor has to forthwith inform the Board and designated depository participant in writing, if any information or particulars previously submitted to the Board or designated depository participant are found to be false or misleading, in any material respect.
  3. The foreign portfolio investor has to forthwith inform the Board and designated depository participant in writing, if there is any material change in the information including any direct or indirect change in its structure or ownership or control, previously furnished by him to the Board or designated depository participant.
  4. The foreign portfolio investor has to, as and when required by the Board or any other Government agency in India, submit any information, record or documents in relation to its activities as a foreign portfolio investor.
  5. The foreign portfolio investor has to forthwith inform the Board and the designated depository participant, in case of any penalty, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator against it.
  6. The foreign portfolio investor has to obtain a Permanent Account Number from the Income Tax Department.
  7. The foreign portfolio investor has to, in relation to its activities as foreign portfolio investor, at all times, subject itself to the extant Indian laws, rules, regulations, guidelines and circulars issued from time to time.
  8. The foreign portfolio investor has to be a fit and proper person based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008.
  9. The foreign portfolio investor has to undertake necessary know your customer details on its shareholders/investors in accordance with the rules applicable to it in the jurisdiction where it is organised.
  10. The foreign portfolio investor has to provide any additional information or documents including beneficiary ownership details of their clients as may be required by the designated depository participant or the Board or any other enforcement agency to ensure compliance with the Prevention of Money Laundering Act, 2002 and the rules and regulations specified thereunder, the Financial Action Task Force standards and circulars issued from time to time by the Board.
  11. The foreign portfolio investor has to ensure that securities held by foreign portfolio investors are free from all encumbrances. An encumbrance created to meet any statutory and regulatory requirements is not considered under this clause.
  12. In case of jointly held depository accounts, each of the joint holders have to meet the requirements specified for the foreign portfolio investor and each will be deemed to be holding a depository account as a foreign portfolio investor.
  13. Multiple entities registered as foreign portfolio investors and directly or indirectly, having common ownership of more than 50% or common control, have to be treated as part of the same investor group and the investment limits of all such entities have to be clubbed at the investment limit as applicable to a single foreign portfolio investor. In case the limit is breached due to transactions by foreign portfolio investors under these regulations, the excess holding has to be divested within 5 trading days from the date of settlement of the trades causing the breach. In case the foreign portfolio investor fails to divest the excess holding, the entire investment in the company by such foreign portfolio investors including its investor group have to be considered as investment under Foreign Direct Investment as per the procedure specified by the Board and the foreign portfolio investor and its investor group cannot make further portfolio investment in that company under these regulations.
  14. Irrespective of what is contained above, the clubbing of investment limit of foreign portfolio investors having common control are not applicable where foreign portfolio investors are appropriately regulated public retail funds or the foreign portfolio investors are public retail funds where the majority is owned by appropriately regulated public retail fund on look through basis or foreign portfolio investors are public retail funds and investment managers of such foreign portfolio investors are appropriately regulated.
  15. In case of any direct or indirect change in structure or common ownership or control of the foreign portfolio investor, it has to forthwith bring the same to the notice of its designated depository participant.
  16. Every foreign portfolio investor has to preserve the books of accounts, records and documents for a minimum period of 5 years from the date of approval of the surrender or cancellation of registration by the Board.
  17. Every foreign portfolio investor has to maintain the following books of accounts, records and documents, which includes true and fair accounts relating to remittances of funds to India for buying and selling, realising capital gains or losses on investment made from such remittances, bank statement of accounts, contract notes relating to purchase and sale of securities and communication including in electronic mode from and to the designated depository participants, stock brokers and depository participants regarding investments in securities.
  18. A foreign portfolio investor, or any of its employees cannot render directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or otherwise, unless a disclosure of its interest including long or short position in the said security has been made, while rendering such advice.
  19. In case, an employee of the foreign portfolio investor is rendering such advice, he also has to disclose the interest of his dependent family members and his employer including their long or short position in the said security, while rendering such advice.
  20. Every foreign portfolio investor has to appoint a compliance officer who is responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines and instructions issued by the designated depository participant or the Board or the Central Government. In case of a foreign portfolio investor who is an individual, such individual is responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines and instructions issued by the designated depository participant or the Board or the Central Government.
  21. The compliance officer has to immediately and independently report any non-compliance observed by him to the Board and the designated depository participant.
  22. An applicant seeking registration as a foreign portfolio investor has to engage a designated depository participant to avail its services for obtaining a certificate of registration as foreign portfolio investor and at all times the designated depository participant and the custodian of the foreign portfolio investor has to be the same entity.
  23. A foreign portfolio investor or a global custodian who is acting on behalf of the foreign portfolio investor, has to enter into an agreement with the designated depository participant engaged by it to act as a custodian, before making any investment under these regulations.
  24. In addition to the obligation of custodian under any other regulations, the custodian has to report to the depositories and the Board, on a daily basis the transactions entered into by the foreign portfolio investor in the form and manner specified by the Board or depositories from time to time, monitor investment of the foreign portfolio investors, maintain the relevant true and fair records, books of accounts, and documents including the records relating to transactions of foreign portfolio investors and report the holdings of foreign portfolio investors who form part of the investor group to the depositories and the depositories have to club the investment limits to ensure that combined holdings of all these foreign portfolio investors remains below 10% of the total paid-up equity capital on a fully diluted basis of an investee company at any time.
  25. A foreign portfolio investor has to appoint a branch of a bank authorised by the Reserve Bank of India for opening a foreign currency denominated account and special non-resident rupee account before making any investments in India.

7. General Obligations and Responsibilities of Designated Depository Participants

  1. All designated depository participants who have been granted approval by the Board have to comply with the provisions of these regulations, as far as they may apply, circulars issued thereunder and any other terms and conditions specified by the Board from time to time.
  2. All designated depository participants have to forthwith inform the Board in writing, if any information or particulars previously submitted to the Board are found to be false or misleading, in any material respect.
  3. All designated depository participants have to forthwith inform the Board in writing, if there is any material change in the information previously furnished by him to the Board.
  4. All designated depository participants have to furnish such information, record or documents to the Board and Reserve Bank of India, as may be required, in relation to its activities as a designated depository participant.
  5. All designated depository participants have to ensure that only registered foreign portfolio investors are allowed to invest in the securities market.
  6. All designated depository participants have to have an adequate systems to ensure that in case of jointly held depository accounts, each of the joint holders meet the requirements specified for foreign portfolio investors and has to perform know your customer due diligence for each of the joint holders.
  7. All designated depository participants have to, in case of any penalty, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by any regulator against a designated depository participant, the designated depository participant has to bring such information forthwith, to the attention of the Board, depositories and stock exchanges.
  8. All designated depository participants have to be guided by the relevant circular on Anti-Money Laundering or Combating the Financing of Terrorism specified by the Board from time to time.
  9. The designated depository participant engaged by an applicant seeking registration as foreign portfolio investor has to ascertain at the time of granting registration and whenever applicable, whether the applicant forms part of any investor group, open a dematerialized account for the applicant only after ensuring compliance with all the requirements under Prevention of Money Laundering Act, 2002 and rules and regulations specified thereunder, Financial Action Task Force standards and circulars issued by the Board in this regard, from time to time and has to also ensure that foreign portfolio investors comply with all these requirements on an ongoing basis, carry out necessary due diligence to ensure that no other depository account per depository is held by any of the concerned applicant as a foreign portfolio investor, before opening a depository account, collect and remit fees to the Board, in the manner as specified in Part A of the Second Schedule and in case of change in structure or constitution or direct or indirect change in common ownership or control reported by the foreign portfolio investor, re-assess the eligibility of such foreign portfolio investor.
  10. The designated depository participant has to maintain segregation of activities such that there is no conflict of interest between the activity of grant of registration to a foreign portfolio investor in the capacity of a designated depository participant and its other activities.
  11. The designated depository participant has to submit the reports as specified by the Board from time to time.
  12. The designated depository participant has to carry out an annual review of its systems, procedures and controls by an independent professional.
  13. The designated depository participant has to furnish to the Board, annual audit reports on its internal control for a particular calendar year within 90 days of the next calendar year.
  14. The designated depository participant has to submit the Action Taken Report, if any, on the audit report on a quarterly basis to the Board.
  15. Every designated depository participant has to maintain the relevant true and fair records, books of accounts, and documents including the physical or electronic records relating to registration of foreign portfolio investors.
  16. The designated depository participant has to intimate the Board in writing the location where such books, records and documents have to be maintained.
  17. Subject to the provisions of any other law for the time being in force, every designated depository participant has to preserve the books of accounts, physical or electronic records and documents specified in this regulation at all times.
  18. Every designated depository participant has to appoint a compliance officer who has to be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines and instructions issued by the Board or the Central Government.
  19. The compliance officer has to immediately and independently report any non-compliance observed by him to the Board.
  20. Every designated depository participant has to, as and when required by the Board or the Reserve Bank of India, submit to the Board or the Reserve Bank of India, as the case may be, any information, such records or documents in relation to its activities of foreign portfolio investors.
  21. A designated depository participant, or any of its employees cannot render directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or otherwise, unless a disclosure of its interest including long or short position in the said security has been made, while rendering such advice.
  22. In case, an employee of the designated depository participant is rendering such advice, he shall also disclose the interest of his dependent family members and his employer including their long or short position in the said security, while rendering such advice.

8. Powers of the Board

  1. Power to inspect to ensure that the books of account, records including telephone records and electronic records and documents are being maintained by the designated depository participants, to ascertain whether any circumstances exist that would render the designated depository participants unfit or ineligible, to inquire into the complaints received from investors, clients, other market participants or any other person on any matter having a bearing on the activities of the designated depository participants, to ascertain whether the provisions of the securities laws and the directions or circulars issued thereunder are being complied with by the designated depository participants, to ascertain whether the systems, procedures and safeguards which have been established and are being followed by the designated depository participants are adequate and to investigate suo moto into the affairs of the designated depository participants in the interest of the securities market or in the interest of investors.
  2. Power to issue notice before inspection.
  3. Power to enforce cooperation for inspection purposes.
  4. Power to require submission of report.
  5. Power to take action on the basis of inspection report.
  6. Power to appoint an auditor.
  7. Power to recover expenses.
  8. Power to issue clarifications.

9. First Schedule

CERTIFICATE OF REGISTRATION

  1.  In exercise of the powers conferred by sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 read with the regulations made thereunder the Board hereby grants a certificate of registration to _______ as a foreign portfolio investor, subject to the conditions specified in the Act and in the regulations made thereunder.
  2. The category and sub- category of the foreign portfolio investor is _______and __________respectively.
  3. The registration number for the foreign portfolio investor is …/…/…/…/….
  4. The address of the foreign portfolio investor is __________________.
  5. This certificate is valid till it is suspended, cancelled or surrendered in accordance with the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019.

Date: 

Place:

By Order 

Signature 

Name and Designation of the Authorised Signatory of 

Designated depository participant 

Issued on behalf of 

Securities and Exchange Board of India


10. Second Schedule

PART A

PAYMENT OF FEES APPLICABLE TO FOREIGN PORTFOLIO INVESTOR

Registration Fee

  1. Foreign portfolio investors belonging to Category I and II have to pay registration fees of USD 3,000 and USD 300, respectively or any other amount specified by the Board from time to time at the time of submission of the Form to the designated depository participant.
  2. Foreign portfolio investors belonging to Category I and II have to pay registration fees for every block of 3 years, till the validity of its registration.
  3. International or multilateral agencies such as the World Bank and other institutions, established outside India for providing aid, which have been granted privileges and immunities from payment of tax and duties by the Central Government are exempted from the payment of registration fees.
  4. The designated depository participants of the respective foreign portfolio investors have to collect the registration fees in advance once in every 3 years from all the foreign portfolio investors registered by it, and remit the fees to the Board in the manner specified by the Board from time to time.
  5. Every designated depository participant has to remit the fees collected from the foreign portfolio investors during the immediate preceding month, to the Board, by the fifth working day of every month, along with the details in the format, as may be specified from time to time.

PART B

PAYMENT OF FEES APPLICABLE TO DESIGNATED DEPOSITORY PARTICIPANT

  1. Every designated depository participant has to pay application fees and approval fees, before commencement of its activity.
  2. Every designated depository participant has to pay an application fee of ` INR 10,000 at the time of making an application, by way of direct credit through NEFT/RTGS/IMPS in the bank account in the name of Securities and Exchange Board of India payable at Mumbai.
  3. Every designated depository participant has to pay approval fees of INR 5,00,000 by way of direct credit through NEFT/RTGS/IMPS in the bank account in the name of Securities and Exchange Board of India payable at Mumbai, at the time of grant of prior approval by the Board.

PART C

COLLECTION OF REGULATORY FEES BY FOREIGN PORTFOLIO INVESTOR FROM ODI SUBSCRIBERS

Regulatory Fee

  1. A foreign portfolio investor has to collect the regulatory fee of USD 1,000 or any other amount, as may be specified by the Board from time to time, from every subscriber of an offshore derivative instrument issued by it and deposit the same with the Board by way of electronic transfer in the designated bank account of the Board.
  2. The regulatory fee has to be deposited once every 3 years beginning from April 1, 2017.

11. Third Schedule

CODE OF CONDUCT

  1. A foreign portfolio investor and its key personnel has to observe high standards of integrity, fairness and professionalism in all dealings in the Indian securities market with intermediaries, regulatory and other government authorities.
  2. A foreign portfolio investor has to, at all times, render high standards of service, exercise due diligence and independent professional judgment.
  3. A foreign portfolio investor has to ensure and maintain confidentiality in respect of trades done on its own behalf or on behalf of its clients.
  4. A foreign portfolio investor has to ensure the clear segregation of its own money and securities and that of its client’s money and securities and arm’s length relationship between its business of fund management/investment and its other business.
  5. A foreign portfolio investor has to maintain an appropriate level of knowledge and competency and abide by the provisions of the Act, regulations made thereunder and the circulars and guidelines, which may be applicable and relevant to the activities carried on by it. Every foreign portfolio investor has to also comply with the award of the Ombudsman and decision of the Board under SEBI (Ombudsman) Regulations, 2003.
  6. A foreign portfolio investor cannot make any untrue statement or suppress any material fact in any documents, reports or information to be furnished to the designated depository participant and/or Board.
  7. A foreign portfolio investor has to ensure that good corporate policies and corporate governance policies are observed by it.
  8. A foreign portfolio investor has to ensure that it does not engage in fraudulent and manipulative transactions in the securities listed in any stock exchange in India.
  9. A foreign portfolio investor or any of its directors or managers cannot, either through its/his own account or through any associate or family members, relatives or friends indulge in any insider trading.
  10. A foreign portfolio investor cannot be a party to or instrumental for creation of false market in securities listed or proposed to be listed in any stock exchange in India, price rigging or manipulation of prices of securities listed or proposed to be listed in any stock exchange in India and passing of price sensitive information to any person or intermediary in the securities market.

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Manohar Samal