FPI Services in India

Basic Architecture

Who can be an FPI ?
a. Foreign Portfolio Investor (FPI) is a resident individual or entity in any country other than India. FPI is not a Non-Resident Indian (NRI) / Overseas Citizen of India (OCI) or a Resident Indian (RI).

b. If the investor entity is non-individual, NRI / OCI / RI may be constituents if:
  i. RI (being non-individual) is an eligible fund manager and
  ii. The entity is an eligible investment fund.
      OR
  i. The entity is an Alternative Investment Fund (AIF) set up in the International Financial Services Centre (IFSC).
  ii. RI is a sponsor or manager of the entity
  iii. Contribution of RI shall be:
      a. In case of Category I or II AIF, lower of 2.5% of the corpus or US$ 0.75 million
      b. In case of Category III AIF, lower of 5% of the corpus or US$ 1.5 million

c. Investor is from a Country which:
  i. is a member of IOSCO
  ii. have bilateral MOU with SEBI
  iii. whose central bank is a member of BIS
  iv. is not in the sanction list notified by UNSC and
  v. is not listed in public statement issued by FATF

d. Investor has sufficient experience, good track record, is professionally competent, financially sound, generally good reputation of fairness and integrity

Classification

There are two categories of FPIs, classified as under:

Category I

a. 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 investors.

b. Pension funds and university funds.

c. Appropriately regulated entities such as insurance or reinsurance entities, banks, asset management companies, investment managers, investment advisors, portfolio managers, broker dealers and swap dealers.

d. Entities from the Financial Action Task Force (FATF) member countries which are:
  i. Appropriately regulated funds.
  ii. Unregulated funds whose investment manager is appropriately regulated and registered as a Category I FPI - provided that the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund.
  iii.University related endowments of such universities that have been in existence for more than five years.

e. An entity:
Whose investment manager is from FATF member country and such an investment manager is registered as Category I FPI; or
Which is at least 75% owned, directly or indirectly by another entity, eligible under sub-clause (b), (c) and (d) above, and such an eligible entity is from a FATF member country.

Category II

Includes all the investors not eligible under Category-I Foreign Portfolio Investor such as

a. Appropriately regulated funds not eligible as Category-I foreign portfolio investor
b. Endowments and foundations
c. Charitable organisations
d. Corporate bodies
e. Family offices
f. Individuals
g. Appropriately regulated entities investing on behalf of their client, as per conditions specified by the Board from time to time
h. Unregulated funds in the form of limited partnership and trusts

Omnibus Accounts

Appropriately regulated entities such as banks and merchant banks, asset management companies, investment managers, investment advisors, portfolio managers, insurance & reinsurance entities, broker dealers and swap dealers will be permitted to undertake investments on behalf of their clients as Category II FPIs in addition to undertaking proprietary investment by taking separate registrations as Category I FPI.

a. Where such entities are undertaking investments on behalf of their clients, Category II FPI registration shall be granted subject to following conditions: Clients of FPI can only be individuals and family offices.

b. Clients of FPI should also be eligible for registration as FPI and should not be dealing on behalf of third party.

c. If the FPI is from a Financial Action Task Force member country, then the KYC including identification & verification of beneficial owner of the clients of such FPI should be done by the FPI as per requirements of the home jurisdiction of the FPI. FPIs from non-Financial Action Task Force member countries should perform KYC of their clients including identification & verification of beneficial owner as per Indian KYC requirements.

d. FPI has to provide complete investor details of its clients (if any) on quarterly basis (end of calendar quarter) by end of the following month to DDP.

e. Investments made by each such client, either directly as FPI and/or through its investor group shall be clubbed with the investments made by such clients (holding more than 50% in the FPI) through the above referenced appropriately regulated FPIs.

Asset Class for Investments

a. Shares, Debentures and Warrants issued by a listed company or to be listed company
b. Units of Mutual Funds – Equity and Bond Schemes
c. Units of Collective Investment Schemes
d. Derivatives
e. Units of Real Estate Investment Trusts, Infrastructure Investment Trusts and Units of Category III AIF
f. Indian Depository Receipts
g. Debt Securities

In case of secondary market transactions:
  a. The securities transactions can be delivery-based only
  b. The dealing will be through registered stock broker only
  c. Securities should be in dematerialised form
  d. The equity shareholding by a single FPI, including its investor group, shall be below 10% of paid up equity capital of the investee company.

Offshore Derivative Instruments

Offshore derivative instruments can be issued if:
  a. The issuer is Category I FPI
  b. The instruments are issued to persons eligible for registration as Category I FPI
  c. ‘Know Your Client’ norms are complied with
  d. In case of transfer, the above conditions should be met

Procedure to Open the Account

Appoint a Stock-Broker / Custodian who will assist you in:
  a. Applying for Unique Income Tax Code (called as PAN in India)
  b. Opening Rupee based bank account
  c. Opening a Demat account for custody of your securities
  d. Open a brokerage account for transacting

In about 3 to 4 weeks from the date of receipt of all the documents duly signed, the FPI will be able to bring in money & start investing.

Procedure to Process the Transaction

  a. The FPI can place buy / sell orders directly with the stock-broker OR route it through their Order Management System which may be provided by Custodian. The FPI can access the status of their orders & execution status through an online browser-based system application.
  b. Post Execution of trades, the settlement of securities as well as funds will be done by Custodian without any action needed from FPI’s end.
  c. Custodian will deduct withholding tax and pay to the Government, wherever applicable, on each sale transaction during investment activity in India.
  d. Investments by FPIs are governed by overall limits which varies in case of each company and each asset class. Monitoring of such limits will be done by the Custodian.
  e. The Funds invested through this route are fully repatriable at any point of time.
  f. The tax returns in India can be managed by FPI appointed consultants. Alternatively, we can assist in appointing the tax consultants.

What we can do for you?

We will:
  a. Engage a Custodian for you to take care of documentation and custody of assets
  b. Engage a bankers to open and maintain Rupee denominated bank accounts
  c. Open a brokerage account for execution of trades
  d. Regularly monitor your Portfolio
  e. Engage a tax consultant to take care of compliance