Foreign Portfolio Investor Registration

Are you ready to broaden your investment portfolio and explore exciting opportunities in foreign markets? If so, foreign portfolio investor (FPI) registration may be just what you need to get started. But what exactly is FPI registration, and how can it benefit you as an investor? In this post, we’ll dive into everything you need to know about FPI registration and the advantages it offers. Whether you’re a seasoned investor or just starting out, read on to discover how FPI registration can help you achieve your financial goals.

1. Overview of Foreign Portfolio Investment in India

Foreign Portfolio Investment (FPI) refers to investments made by foreign entities in the shares and securities of Indian companies. These investments are regulated by the Securities and Exchange Board of India (SEBI) through provisions of the Companies Act 2013 and Securities Law, in addition to the SEBI (Foreign Portfolio Investors) Regulations 2019. To register as an FPI, applicants must liaise with regulatory authorities and pay the prescribed fee, which must be renewed every three years. However, some institutions, such as international banks and multilateral agencies like the World Bank, are exempt from fees. The application process typically takes 30 days, and once approved, a certificate of registration is granted by the DDP.

SEBI recently issued new Operational Guidelines for FPIs in November 2019, which aim to simplify operational and compliance requirements and boost foreign investment in India. The new SEBI (Foreign Portfolio Investors) Regulations 2019 replace those issued in 2014, eliminating redundant regulatory conditions and lessening compliance requirements for FPIs. Category I FPIs are no longer required to satisfy broad-based conditions, while Category II FPIs are no longer permitted to issue or invest in Offshore Derivative Instruments. However, funds from Mauritius may face eligibility restrictions for Category I FPI registration. Additional KYC compliances may apply for funds previously categorized as Category II under the 2014 regulations. PwC offers services to assist with FPI registration and compliance, including tax and regulatory advice. 

2. Regulatory Framework for Foreign Portfolio Investors

The regulatory framework for Foreign Portfolio Investors (FPIs) in India has been recently updated by the Securities and Exchange Board of India (SEBI). The new SEBI FPI Regulations 2019 and Operational Guidelines aim to ease the registration process and reduce compliance requirements for FPIs. Under the new guidelines, there is no longer a requirement for a fund to be characterized as a Category I FPI, and Category II FPIs are not allowed to issue or invest in Offshore Derivative Instruments. However, there may be additional KYC compliances for funds that were Category II under the previous SEBI FPI Regulations 2014 and continue to be Category II under the new SEBI FPI Regulations 2019. Those interested in investing in India under the FPI route can seek assistance with the implementation of their structure, obtaining PAN and FPI registration, compliance services, and any other tax or regulatory advice required.

Foreign Portfolio Investments (FPIs) refer to investments by foreign entities in the shares and securities of an Indian company. The provisions of the Companies Act 2013 and Securities Law would govern Foreign Portfolio investors. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 also govern Foreign portfolio investment registration. The process for securing registration requires the payment of a fee, and the DDP must review the application within 30 days and collect fees in advance every three years. The online process of FPI registration via the NSDL FPI portal requires submission of the Common Application Form and supporting documents uploaded through the portal, with copies of the documents provided to the DDP. Certificates granted may be suspended or cancelled for various reasons, including failure to pay fees or comply with regulatory requirements. 

3. Procedure for Foreign Portfolio Investor Registration

Foreign Portfolio Investor Registration is a process that involves foreign investment in shares and securities of Indian companies. Entities interested in such investments are required to register as a trading entity under the Securities Exchange Board of India (SEBI) 1992. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 govern the process of Foreign Portfolio Investor Registration. The application for registration should be submitted to the concerned regulatory authority along with the necessary documents and prescribed fees. The application is reviewed by the Designated Depository Participant (DDP) within 30 days, and if no issues are found, the applicant is issued a certificate of registration. The certificate has to be renewed every block of three years by paying the prescribed registration fee. Alternatively, international banks and multilateral agencies such as the World Bank are exempted from such fees. If the applicant fails to comply with the requirements or provides misleading information, the DDP may reject the application. However, the applicant has a 30-day period to submit a communication for reconsideration of the application. The application form is available online through the Common Application Form that DDP authorizes and provides access to on the NSDL FPI portal.

Foreign Portfolio Investor Registration holds various benefits such as exchange rate benefits, encouragement towards secondary issuance, and access to the international market, among others. There are three categories of investment under FPI Registration based on the risk of foreign investment. The DDP decides the eligibility criteria for registration, and any non-Indian or non-resident Indian investors, including High-Net-Worth Individuals and family-owned corporates, can apply for registration, subject to fulfilling the prescribed criteria. The candidate should offer 25% more corpus while registering. The certificate of registration can be suspended for various reasons, primarily non-compliance with the code of conduct prescribed in the SEBI (Foreign Portfolio Investors) Regulations. Overall, the registration process is straightforward, and the DDP plays a key role in facilitating the procedure. 

4. Documentation Required for Foreign Portfolio Investor Registration

Foreign Portfolio Investor Registration requires the submission of several documents. The Securities and Exchange Board of India (Foreign Portfolio Investor) Regulations 2019 governs Foreign Portfolio Investment Registration. The applicant must pay the prescribed fee, as per regulation 3 and regulation 7(3), for registering as a foreign portfolio investor. The registration fee must be paid every block in three years till the validity of. However, particular institutions like international banks and multilateral agencies, exempt from payment of taxes to the central government, are exempted from paying the registration fees. The designated depository participant (DDP) would review the application and provide the certificate of registration bearing the registration number generated by the National Securities Depositories Limited (NSDL). The DDP has to complete the procedures related to application processing within 30 days. The DDP would collect the fee from the applicant in advance once in every three years. The fee would only be remitted once the certificate of registration is granted to the applicant. If the application is misleading or does not confirm with the requirements, then the DDP would reject it. However, before rejection, the DDP would provide an opportunity to the applicant to be heard. From the date of rejection, the applicant has to communicate for reconsideration of the application within 30 days. 

5. Fee Structure for Foreign Portfolio Investor Registration

Foreign Portfolio Investor Registration in India requires an applicant to pay a prescribed fee for registering as an FPI. This fee must be paid every block in three years, until the validity of the registration. However, certain institutions that are exempt from paying taxes to the central government, such as international banks and multilateral agencies like the World Bank, may be exempt from paying the registration fee. The Designated Depository Participant (DDP) would review the application for FPI registration and, if there are no issues, provide a certificate of registration bearing the registration number. The DDP would then collect the fee for FPI registration every three years in advance and remit it to the board.

The fee for FPI registration varies, depending on the registered category. Category-I FPIs pay a registration fee of $1,000, while Category-II FPIs pay a registration fee of $2,000. Meanwhile, Category-III FPIs pay a registration fee of $8,000. Fees must be remitted by the applicant by the fifth working day of every month, alongside the FPI’s details in the prescribed format. However, the fee will only be remitted once the certificate of FPI registration is granted to the applicant. In case the application’s information is misleading or does not comply with the requirements, the DDP may reject the application.

If the DDP rejects an FPI registration application, it must provide a reason for the same and give the applicant an opportunity to be heard. The applicant has 30 days from the date of rejection to make a communication for the reconsideration of the application. Failure to pay the registration fee will also result in the application’s suspension. The applicant must, therefore, ensure their compliance with the regulatory requirements for FPIs. 

6. Review Process for Foreign Portfolio Investor Registration

Foreign Portfolio Investor registration is a form of foreign investment in the securities and shares of Indian companies. Regulations, laws and SEBI 1992 would control such investors. The SEBI (Foreign Portfolio Investors) Regulations 2019 contains the rules for foreign portfolio investment registration. An applicant must pay a fee under regulation 3 and 7(3). The DDP reviews the application and ensures the applicant followed the rules. If there are no issues, the DDP provides a certificate of registration bearing the registration number generated by the National Securities Depositories Limited within 30 days. Exemptions include international banks and multilateral agencies such as the World Bank. The DDP has the power to call for information and also has the authority to reject the application if the information provided is misleading. An online application process is available on the NSDL FPI portal.

The significance of Foreign Portfolio Investor registration is in giving access to international markets, increase in secondary market, and acquiring exchange rate benefits. An Indian entity registered with the stock exchange would have to obey SEBI, and any offshore fund under the discretion of an Asset Management Company would have to apply. Based on the risk of investment, there are three categories under FPI registration; Category I, Category II, and Category III. Foreign Portfolio Investor Registration must acquire a Certificate of Registration (COR) from the particular board. The candidate must satisfy the requirements of the DDP and the Board for Foreign Portfolio Investor Registration.

The Designated Depository Participant (DDP) is an individual or institution that a candidate would have to interact with for making such an application for Foreign Portfolio Investor Registration under the SEBI (FPI) Regulations 2019. The DDP would act as a mediator between the board and the applicant to consider different registration types under Foreign Portfolio Investor. After the DDP considers the requirements necessary for the applicant or candidate, the Certificate of Registration would be approved. The eligibility criteria are that the applicant should not be a resident of India or an Indian citizen. If an applicant comes under the categories above, they would not be eligible for this registration.

The review process for Foreign Portfolio Investor Registration involves the DDP reviewing the application and ensuring the applicant followed the rules. If there are no issues, the DDP provides a certificate of registration bearing the registration number generated by the National Securities Depositories Limited within 30 days. The DDP has the authority to reject the application if the information provided in the application is misleading or does not confirm with the requirements. The applicant must satisfy the requirements of the DDP and the Board for Foreign Portfolio Investor Registration. After the DDP considers the requirements necessary for the applicant or candidate, the Certificate of Registration would be approved. 

7. Online Process for Foreign Portfolio Investor Registration

Foreign portfolio investment (FPI) is a type of foreign investment in the shares and securities of an Indian company. To register as an FPI, the company must be a trading entity under the Securities Exchange Board of India 1992 (SEBI), and be governed by the Companies Act 2013 and Securities Law. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 set out the requirements for foreign portfolio investment registration. The online process for FPI registration involves submitting a Common Application Form through the NSDL FPI portal, and uploading supporting documents. The Designated Depository Participant (DDP) will review the application and, if there are no issues, grant a certificate of registration with a registration number generated by the National Securities Depositories Limited (NSDL). The DDP can call for additional information and will collect the registration fee in advance, required every block in three years until the validity of the registration. Applicants can also request a Free Call Back by our Expert and have access to easy payment options. 

8. Suspension of Foreign Portfolio Investor Registration Certificate

Foreign Portfolio Investor Registration is a vital process for investors who want to invest in Indian securities and shares. Generally, FPIs are foreign investments in Indian companies’ securities and shares, which are registered as trading companies under SEBI’s 1992 regulations. However, FPIs are governed by the Companies Act and Securities Law, managed by SEBI (Foreign Portfolio Investors) Regulations 2019. To register as an FPI, an individual or institution must apply and obtain the Certificate of Registration (COR) from the SEBI. The Designated Depository Participant (DDP) mediates between the applicant and the board, ensuring all requirements are met.

There are three different classifications of FPI investment, depending on the level of risk associated with foreign investment. The first category includes government organizations, central banks, international banks, and sovereign wealth funds. The second category includes pension funds, asset management companies who manage a portfolio, and banks’ investment reserves. Any investors not included in the first or second category fall into the third category. This includes family securities, corporate bonds, and individual investors.

One advantage of FPI registration is the exchange rate benefits that investors can enjoy. In addition, registering as an FPI increases the secondary market and provides significant support to share issues. Foreign investors can also benefit from the competition brought about by the international market.

To be eligible for FPI registration, a candidate must be a foreign citizen, cannot be an OCI or NRI cardholder, and must be a member and signatory to the International Organization of Securities Commissions Multilateral MOU. Moreover, 25% of excess corpus must be delivered by the applicant, who must not have any penalties according to the United Nations Security Council (UNSC) and should not be a member of any blacklist nation of the Financial Action Task Force (FATF). The applicant should also pass the Fit and Proper person test, as per Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations 2008.

In the case that the applicant does not fulfil all requirements, their FPI registration certificate may be suspended. The suspension of the FPI registration certificate means that the applicant will no longer be allowed to trade in Indian securities and shares. This could be due to various reasons, such as inadequate compliance with rules and regulations or violation of policies. As such, it is essential for FPI investors to maintain compliance requirements and ensure they meet all necessary qualifications. 

9. Importance of Compliance for Foreign Portfolio Investors

Foreign Portfolio Investors (FPI) are a form of foreign investment in the shares and securities of Indian companies. The Securities Exchange Board of India (SEBI) governs FPIs, along with the Companies Act 2013 and Securities Law. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 also regulate foreign portfolio investment registration. To secure FPI registration, an applicant would have to liaise with the concerned regulatory authority, pay the prescribed fee, and provide the required documentation. It is important to note that the applicant must pay the registration fee every block in three years until the validity of the registration. However, exemptions are available for certain institutions such as international banks and multilateral agencies like the World Bank, which do not need to pay the registration fee. The compliance requirements and procedures involved in obtaining FPI registration ensure that all transactions and investment activities are transparent and follow the guidelines set forth by regulatory authorities. 

10. NSDL’s Role in Foreign Portfolio Investor Registration and Monitoring

National Securities Depository Limited (NSDL) plays a crucial role in the registration and monitoring of Foreign Portfolio Investors (FPIs) in India. As per the SEBI notification dated January 7, 2014, regarding SEBI (Foreign Portfolio Investors) Regulations 2014, NSDL is authorized to issue registration numbers and certificates to FPIs on behalf of SEBI. This move aims to simplify compliance requirements and have uniform guidelines for various categories of foreign investors, such as Foreign Institutional Investors (FIIs), Sub Accounts, and Qualified Foreign Investors (QFIs), merged into a new investor class termed as FPIs.

Apart from issuing registration numbers and certificates to FPIs, NSDL is also responsible for monitoring FPI group investments and various data related to FPI activities to be displayed on the NSDL FPI web portal. It is crucial to note that FPI regime commenced on June 1, 2014, and the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 governs Foreign portfolio investment registration. Therefore, NSDL plays a pivotal role in ensuring the smooth functioning of FPIs in India.

Furthermore, the procedure for securing the Foreign Portfolio Investor Registration requires documentation and liaising with the concerned regulatory authority. As per regulations 3 and 7(3), the applicant must pay the prescribed fee for registering as an FPI. The Directorate of Depositories and Participants (DDP) reviews the FPI registration application, and if there are no issues, the DDP provides the certificate of registration bearing the registration number, generated by NSDL. The DDP must process the application within 30 days and call for information on it if required.

Moreover, there are exemptions for particular institutions like international banks and multilateral agencies that include World Bank. These institutions exempt from payment of taxes to the central government would not require paying the registration fees. However, if the information provided in the application is misleading or does not conform to the requirements, the same would be rejected by the DDP. It is crucial to mention all the FPI details in the prescribed format and remit the fees every block in three years until the registration’s validity. NSDL’s role in registration and monitoring is essential for FPIs operating in India.