Who is an FPI ?
An FPI has been defined to mean a person who satisfies the prescribed eligibility criteria and has been registered under the FPI Regulations. All existing Foreign Institutional Investors (FIIs) and QFIs are to be merged into one category called FPI.
Eligibility Criteria for FPI
An applicant desirous of FPI registration should, inter alia, satisfy the following conditions:
- It should not be resident in India or a Non-Resident Indian.
- It should be a resident of a country:
−whose securities market regulator is a signatory to IOSCO’s Multilateral MOU or a signatory to a bilateral MOU with SEBI; whose central bank is a member of the Bank for International Settlements; against whom the Financial Action Task Force (FATF) has not issued any warnings.
- It should legally be permitted to invest in securities outside the country of its incorporation or establishment or place of business.
- It should be authorized by its Memorandum of Association and Articles of Association or equivalent document(s) or the agreement to invest on its own behalf or on behalf of its clients.
- It must be a fit and proper person as prescribed.
Categories of FPI
Operating Procedure for FPI+
Rather than going through SEBI, FPIs now have to come through DDP (Designated Depositary Participant). Application to the DDP has to be made by Foreign investor for any one of the above categories. KYC guidelines are significantly simplified for Category II & III and are virtually not required for Category I investors.
The other significant change is in terms of Order Routing. Earlier, all QFIs had to route the orders to through the custodian, now just like FII, FPI can direct place the order with the broker.
Some of the key obligations for FPI include appointing a Compliance Officer to ensure compliance with FPI Regulations, appoint a CA in India for PAN Card and Tax Related Obligations and enter in to an agreement with a DDP to act as custodian.
Impact on existing investors (FII, sub account & QFI)
FII : Existing FIIs can continue to buy and sell securities till the expiration of their certificate. However, they need to convert into FPI before the expiry of certificate.
Sub Account : Can continue to buy and sell securities till the validity of existing registration. However, they need to convert into FPI before the expiry of their registration.
Qualified Foreign Investors (QFI) : Have to register as FPI before Jan 06, 2015.