TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019
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.... the date of their publication in the Official Gazette. Definitions. 2. (1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below, and their cognate expressions and variations shall be construed accordingly,- (a) "Act" means the Securities and Exchange Board of India Act, 1992; (b) "appropriately regulated" entity means an entity which is regulated by the securities market regulator or the banking regulator of home jurisdiction or otherwise, in the same capacity in which it proposes to make investments in India; (c) "Bilateral Memorandum of Understanding with the Board" shall mean a bilateral Memorandum of Understanding between the Board and any authority outside India that provides for information sharing arrangement as specified under clause (ib) of sub-section (2) of Section 11 of the Act; (d) "Board" means the Securities and Exchange Board of India established under section 3 of the Act; (e) "certificate" means a certificate of registration granted to a foreign portfolio investor by the designated depository participant on behalf of the Board under t....
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....ions used and not defined in these regulations, but defined in the Act or the Foreign Exchange Management Act, 1999, the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 or the rules and regulations made thereunder shall have the same meaning respectively assigned to them in those Acts or rules or regulations or any statutory modification or re-enactment thereto. CHAPTER II REGISTRATION OF FOREIGN PORTFOLIO INVESTORS Application for grant of certificate as a foreign portfolio investor. 3. (1) No person shall buy, sell or otherwise deal in securities as a foreign portfolio investor unless it has obtained a certificate granted by a designated depository participant on behalf of the Board. Explanation - An offshore fund floated by an asset management company that has received no-objection certificate in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, shall be required to obtain registration as a foreign portfolio investor, for investment in securities in India, within one hundred and eighty days from the date of notification of these regulations. (2) An application for the gr....
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.... based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; (h) any other criteria specified by the Board from time to time: Provided that clause (a), (d) and (e) shall not apply to an applicant incorporated or established in an International Financial Services Centre. Categories of foreign portfolio investor. 5. An applicant seeking registration as a foreign portfolio investor may apply in one of the categories mentioned hereunder or any other category as may be specified by the Board from time to time - (a) "Category I foreign portfolio investor" which shall include - (i) 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% directly or indirectly owned by such Government and Government related investor(s); (ii) Pension funds and university funds; (iii) Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap deal....
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....connection with the grant of a certificate. Certificate of registration 7.(1) The designated depository participant shall on behalf of the Board grant the certificate of registration, bearing registration number generated by National Securities Depositories Limited, as specified in the First Schedule to an applicant if it is satisfied that the applicant is eligible and fulfils the requirements as specified in these regulations. (2) The designated depository participant shall endeavour to dispose of the application for grant of certificate of registration as soon as possible but not later than thirty days after receipt of application by the designated depository participant, or after the information called for under regulation 6 has been furnished; whichever is later. (3) Upon grant of certificate of registration to the applicant, the designated depository participant shall remit the fees, as specified in Part A of the Second Schedule, received from the applicant to the Board. (4) If an applicant seeking registration as a foreign portfolio investor has any grievance with respect to its application or if the designated depository participant has any question in respect....
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....anted by the designated depository participant on behalf of the Board under these regulations shall be permanent unless suspended or cancelled by the Board or surrendered by the foreign portfolio investor. (2) The suspension and cancellation of the certificate of registration granted by the Board under these regulations, shall be dealt with in the manner as provided in Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (3) When the foreign portfolio investor fails to pay the required fees for continuance of registration within the specified due date and such foreign portfolio investor does not have any cash or security or derivative position in India, such foreign portfolio investor shall be deemed to have applied for surrender of its registration and the designated depository participant of such foreign portfolio investor shall process the surrender after obtaining the approval from the Board. (4) Any foreign portfolio investor desirous of surrendering the certificate of registration may request for such surrender to the designated depository participant who shall accept the surrender of the certificate of registration after obtain....
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....er criteria as may be specified by the Board from time to time. (2) Notwithstanding anything contained in sub-regulation (1) of this regulation, the Board may consider an application from an entity, regulated in India or in its home jurisdiction, for grant of approval to act as designated depository participant, upon being satisfied that the applicant has sufficient experience in providing custodial services and that the grant of such approval is in the interest of the development of the securities market: Provided that such entity shall be registered with the Board as a participant and custodian, and shall have a tie up with Authorised Dealer Category-1 bank. Furnishing of information, clarification and personal representation. 12. (1) The Board may require the applicant or the depository of which the applicant is a participant to furnish such further information or clarification as may be considered necessary for grant of approval to act as a designated depository participant. (2) The applicant or its authorised representative shall, if so required by the Board, appear before it for personal representation in connection with the grant of approval. Procedure for ....
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....tory participant. Suspension or withdrawal of approval. 17. Where any designated depository participant who has been granted approval under these regulations- (a) fails to comply with any conditions subject to which an approval has been granted to him under these regulations, or (b) contravenes any of the provisions of the securities laws or directions, instructions or circulars issued thereunder; the Board may, without prejudice to any action under the securities laws or directions, instructions or circulars issued thereunder, by an order suspend or withdraw such approval after providing the designated depository participant a reasonable opportunity of being heard. Surrender of approval. 18. (1) Any designated depository participant, who has been granted approval under these regulations, desirous of surrendering the approval granted, may make a request for such surrender to the Board. (2) While accepting the surrender under sub-regulation (1), the Board may impose such conditions as it deems fit for the protection of investors or the clients of the designated depository participant or the securities market and such person shall comply with such conditions. ....
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.... transactions in accordance with the framework specified by the Board; (iii) any transaction in securities pursuant to an agreement entered into with the merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter IX of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (iv) any other transaction specified by the Board; (c) The transaction involving dealing in securities by a foreign portfolio investor shall be only through stock brokers registered with the Board; (d) Nothing contained in clause (c) of this sub-regulation shall apply to - (i) transactions in Government securities and such other securities falling under the purview of the Reserve Bank of India carried out in the manner as specified by the Reserve Bank of India; (ii) sale of securities in response to a letter of offer sent by an acquirer in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; (iii) sale of securities in response to an offer made by any promoter or acquirer in accordance with the Secu....
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....re multi investment manager structure of the same beneficial owner and have common Permanent Account Number; and (xiv) any other transaction as may be specified by the Board; (e) A foreign portfolio investor shall hold, deliver or cause to be delivered securities only in the dematerialized form: Provided that any shares held in the physical form, before the commencement of these regulations, may continue to be held in the physical form, if such shares cannot be dematerialised: Provided further that all the Rights Entitlements may be held or transferred in non-dematerialized form. (5) In respect of investments in the debt securities, the foreign portfolio investors shall also comply with terms, conditions or directions, specified or issued by the Board or Reserve Bank of India, from time to time, in addition to other conditions specified in these regulations. (6) Unless otherwise approved by the Board, securities shall be registered in the name of the foreign portfolio investor as a beneficial owner as defined in clause (a) of sub-section (1) of section 2 of the Depositories Act, 1996. (7) The purchase of equity shares of each company by a single foreign portfol....
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....21. (1) No foreign portfolio investor may issue, subscribe to or otherwise deal in offshore derivative instruments, directly or indirectly, unless the following conditions are satisfied - (a) such offshore derivative instruments are issued only by persons registered as Category I foreign portfolio investor; (b) such offshore derivative instruments are issued only to persons eligible for registration as Category I foreign portfolio investors; Explanation - For the purpose of this sub-regulation, where an entity has an investment manager who is from the Financial Action Task Force member country, the investment manager shall not be required to be registered as a Category I foreign portfolio investor; (c) such offshore derivative instruments are issued after compliance with the 'know your client' norms as specified by the Board; and (d) such other conditions as may be specified by the Board from time to time. (2) A foreign portfolio investor shall ensure that any transfer of offshore derivative instruments issued by or on behalf of it, is subject to the following conditions - (a) such offshore derivative instruments are transferred to persons subject to the fulfil....
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....s as foreign portfolio investor, at all times, subject itself to the extant Indian laws, rules, regulations, guidelines and circulars issued from time to time; (h) be a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; (i) undertake necessary KYC on its shareholders/investors in accordance with the rules applicable to it in the jurisdiction where it is organised; (j) provide any additional information or documents including beneficiary ownership details of their clients as may be required by the designated depository participant or the Board or any other enforcement agency to ensure compliance with the Prevention of Money Laundering Act, 2002 and the rules and regulations specified thereunder, the Financial Action Task Force standards and circulars issued from time to time by the Board; and (k) ensure that securities held by foreign portfolio investors are free from all encumbrances. Explanation - An encumbrance created to meet any statutory and regulatory requirements shall not be considered under this clause. (2) In case of jointly held depository accounts, each ....
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....itory participant. Code of conduct. 23. A foreign portfolio investor shall, at all times, abide by the code of conduct as specified in the Third Schedule of these regulations. Engagement of designated depository participant 24. An applicant seeking registration as a foreign portfolio investor shall engage a designated depository participant to avail its services for obtaining a certificate of registration as foreign portfolio investor and at all times the designated depository participant and the custodian of the foreign portfolio investor shall be the same entity. Appointment of custodian. 25. (1) A foreign portfolio investor or a global custodian who is acting on behalf of the foreign portfolio investor, shall enter into an agreement with the designated depository participant engaged by it to act as a custodian, before making any investment under these regulations. (2) In addition to the obligation of custodian under any other regulations, the custodian shall - (a) report to the depositories and the Board on a daily basis the transactions entered into by the foreign portfolio investor in the form and manner specified by the Board or depositories from time ....
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....documents. 29. Every foreign portfolio investor shall maintain the following books of accounts, records and documents, namely - (a) true and fair accounts relating to remittances of funds to India for buying and selling; and realising capital gains or losses on investment made from such remittances; (b) bank statement of accounts; (c) contract notes relating to purchase and sale of securities; and (d) communication including in electronic mode from and to the designated depository participants, stock brokers and depository participants regarding investments in securities. Preservation of books of accounts, records and documents. 30. Subject to the provisions of any other law, for the time being in force, every foreign portfolio investor shall preserve the books of accounts, records and documents specified in regulation 29 for a minimum period of five years from the date of approval of the surrender or cancellation of registration by the Board. CHAPTER VI GENERAL OBLIGATIONS AND RESPONSIBILITIES OF DESIGNATED DEPOSITORY PARTICIPANTS Obligations and responsibilities of designated depository participants. 31. (1) All designated depository participants ....
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....depository is held by any of the concerned applicant as a foreign portfolio investor, before opening a depository account Provided that a foreign portfolio investor can open separate depository accounts for holding securities under the Voluntary Retention Route or any other scheme as specified by the Reserve Bank of India or the Board; (d) collect and remit fees to the Board, in the manner as specified in Part A of Second Schedule; and (e) in case of change in structure or constitution or direct or indirect change in common ownership or control reported by the foreign portfolio investor, re-assess the eligibility of such foreign portfolio investor. (3) The designated depository participant shall maintain segregation of activities such that there is no conflict of interest between the activity of grant of registration to a foreign portfolio investor in the capacity of a designated depository participant and its other activities. (4) The designated depository participant shall submit the reports as specified by the Board from time to time. (5) The designated depository participant shall carry out an annual review of its systems, procedures and controls by an indepen....
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.... interest including long or short position in the said security has been made, while rendering such advice. (2) In case, an employee of the designated depository participant is rendering such advice, he shall also disclose the interest of his dependent family members and his employer including their long or short position in the said security, while rendering such advice. CHAPTER VII INSPECTION Board's right to inspect. 36. The Board may suo moto or upon receipt of any information or complaint, appoint one or more persons as inspecting authority to undertake inspection of the books of account, records and documents relating to a designated depository participant for any of the following purposes, namely, - (a) to ensure that the books of account, records including telephone records and electronic records and documents are being maintained by the designated depository participants; (b) to ascertain whether any circumstances exist that would render the designated depository participants unfit or ineligible; (c) to inquire into the complaints received from investors, clients, other market participants or any other person on any matter having a bearing on th....
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....the statements of any director, officer or employee of the designated depository participants. (4) It shall be the duty of every director, officer or employee of the designated depository participants to give to the inspecting officer all assistance in connection with the inspection, which the inspecting officer may reasonably require. Submission of report to the Board. 39. The inspecting officer shall, as soon as possible, on completion of the inspection or investigation as the case may be, submit a report to the Board: Provided that if directed to do so by the Board, the inspecting officer may submit interim report(s). Action on inspection report. 40. The Board shall after consideration of the inspection report, take such action as it may deem fit including action under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. Appointment of an auditor. 41. The Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of account, records, documents, infrastructures, systems and procedures or affairs of the applicant or the designated depository participants, as the case ....
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.... Investor) Regulations, 2014 shall be re-categorised by their respective designated depository participant; (c) any offshore derivative instrument issued under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 before the commencement of these regulations shall be deemed to have been issued under the corresponding provisions of these regulations; (d) any application made to the Board under the repealed regulations, prior to such repeal, and pending before it shall be deemed to have been made under the corresponding provisions of these regulations; and (e) the previous operation of the repealed regulations or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the repealed regulations, any penalty, incurred in respect of any violation committed against the repealed regulations, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the repealed regulations has never been repealed; (3) After the repeal of Securities and Exchange Board of India (Foreign ....
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....nts of the respective foreign portfolio investors shall collect the registration fees in advance once in every three years from all the foreign portfolio investors registered by it, and remit the fees to the Board in the manner specified by the Board from time to time. (5) Every designated depository participant shall remit the fees collected from the foreign portfolio investors during the immediate preceding month, to the Board, by 5th working day of every month, along with the details in the format, as may be specified from time to time. PART B PAYMENT OF FEES APPLICABLE TO DESIGNATED DEPOSITORY PARTICIPANT [See regulation 10(2) and regulation 13(1)] (1) Every designated depository participant shall pay application fees and approval fees, before commencement of its activity. (2) Every designated depository participant shall pay application fees of Rs. 10,000/- at the time of making application, by way of direct credit through NEFT/RTGS/IMPS in the bank account in the name of "Securities and Exchange Board of India" payable at Mumbai. (3) Every designated depository participant shall pay approval fees of Rs. 5,00,000/- by way of direct credit through NEFT/RTGS....