SEBI comes out with operational guidelines for new FPI regulations

Markets watchdog Securities and Exchange Board of India has issued consolidated operational guidelines for foreign portfolio investors (FPIs) and designated depository participants to facilitate implementation of the new FPI regulations. The Foreign Portfolio Investor (FPI) Regulations came into force from September 23.

Under the new norms, all insurance entities and funds from FATF member countries have been classified as category-I FPIs.

Among others, unregulated funds or entities where the regulated investment manager is from a non-FATF member country would be under category-II.

To ensure transition of existing FPIs, re-categorisation of registration would be done by National Securities Depository Limited (NSDL) in consultation with the respective designated depository participants (DDPs).

An FPI can seek recategorisation from category-II to I after providing requisite information and applicable fees to the DDP.

"These consolidated operational guidelines for foreign portfolio investors and designated depository participants are issued to facilitate implementation of SEBI (Foreign Portfolio Investors) Regulations, 2019," SEBI said.

In case, the aggregate investment limit is breached, the FPI concerned has to sell the excess holdings only to domestic investors, as per the guidelines.

Once the holding crosses the limit, the depositories have to inform stock exchanges about the breach.

"In the event of a breach of the sectoral cap/aggregate FPI limit/aggregate NRI limit, the foreign investors shall divest their excess holding within 5 trading days from the date of settlement of the trades, by selling shares only to domestic investors," the regulator said.