Sebi relaxes FPI norms; allows off-market transfer of securities

New Delhi: Easing the regulatory framework for foreign portfolio investors, Sebi has simplified KYC requirements for them and permitted them to carry out off-market transfer of securities.

Besides, the regulator has broad-based the classification for foreign portfolio investors (FPIs) and simplified their registration process.

The notification comes after the board of Sebi in August approved a proposal to simplify the regulatory norms for FPIs.

The new regulations have been redrafted based on the recommendation of a committee headed by former RBI deputy governor H R Khan.

Under the new framework, FPIs would be classified into two categories instead of three. At present, Sebi has classified FPIs into three categories with the easier compliance norms for Category-I FPIs and the strictest for Category-III FPIs. The most well-regulated FPIs come under Category-I.

As per the new rule, the 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 per cent directly or indirectly owned by such government and government related investor; pension and university funds would fall under the Category-I FPIs.

Besides, appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers would come under the Category-I.

Sebi said that Category II FPIs will include all the investors not eligible under Category I foreign portfolio investors such as endowments and foundations; charitable organisations; corporate bodies; family offices; individuals; appropriately regulated entities investing on behalf of their client; and unregulated funds in the form of limited partnership and trusts.

The new FPI regulations would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said in a notification issued on Monday.

Besides, the regulator has allowed FPIs to buy or sell shares off-market to any domestic or foreign investor even if the scrip of such a firm is illiquid or suspended or delisted.