INDIA: SEBI committee recommends merging of India foreign investor classes

Thursday June 13 2013

The Securities and Exchange Board of India`s Committee recommends merging of India foreign investor classes on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments has submitted a report to government with the following recommendations:

1. Existing FIIs, Sub Accounts and Qualified Foreign Investors (QFI) should be merged into a new investor class to be termed as “Foreign Portfolio Investor” (FPI). The aggregate investment limit would be 24%.

2. In view of the special nature of the investments from Non Resident Indians (NRIs) and Foreign Venture Capital Investors (FVCIs), it was felt desirable to continue with these two classes for the present. NRIs should continue to have individual investment limits of 5% and aggregate investment limits of 10%. FOr FVCI, the present list of nine sectors should be considerably expanded, or alternately replaced with a negative list.

3. The prior direct registration requirement of FIIs and Sub Accounts with SEBI should be removed. Instead, FPIs should be able to register themselves with and transact through Designated Depository Participants (DDPs).

4. Portfolio investments should be defined as investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Any investment beyond the threshold of 10% should be considered as Foreign Direct Investment (FDI).

5. Risk Based Approach towards Know Your Client (KYC).

6. With regard to issuance of Offshore Derivative Instruments (ODI) / Participatory Notes (PN), FPIs belonging to Category III should not be allowed to issue ODI/ PN.  Further, ODI/ PN issuer FPIs should continue to report directly to SEBI.

7. The Committee also identified the changes required to be effected in different statutes to bring about the proposed recommendations into effect. 

Click on the above link for the committee press release.