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SEBI (Foreign Portfolio Investors) Regulations: Meaning and Recent Amendments

SEBI FPI Regulation Amendments 2023

SEBI FPI Regulation Amendments 2023

Securities and Exchange Board of India (SEBI) is a regulatory body. It is tasked with the responsibility of regulating and developing the securities market in India. Furthermore, SEBI is also responsible for managing the foreign investments in India.

For this purpose, the Securities and Exchange Board of India introduced the SEBI (Foreign Portfolio Investors) Regulations, 2014. However, it is now replaced by the SEBI (Foreign Portfolio Investors) Regulations, 2019.

In this article, we will understand what the SEBI (Foreign Portfolio Investors) Regulations, 2019 is all about. Furthermore, we will also discuss the recent amendments.

SEBI FPI Regulation Amendments 2023

Why were SEBI (Foreign Portfolio Investors) Regulations Introduced?

India being a developing nation, is one of the fastest growing investment destinations for global investors. With increased stability on the foreign investment front, international investors and businesses are exploring greater opportunities. To encourage foreign inflows to the secondary market has always received special attention as an efficient securities market plays a significant role in the growth of an economy.

The opening of Foreign Direct Investment (FDI) has led to the introduction of Foreign Portfolio Investment Regulations. This will make India a more attractive destination amongst international markets.

For the purpose of encouraging and simplifying foreign portfolio investment, SEBI introduced the SEBI (Foreign Portfolio Investors) Regulations, 2014. 

Difference Between FDI, FPI and FII

CriteriaFDI (Foreign Direct Investment)FPI (Foreign Portfolio Investment)FII (Foreign Institutional Investment)
MeaningForeign investment involving a lasting interest in an enterprise in another country.Investment in financial assets such as stocks and bonds of a foreign company.A subset of FPI, referring specifically to institutional investors like mutual funds, insurance companies, etc.
Form of InvestmentDirect ownership or controlling interest in the company.Indirect ownership without influencing or controlling the company’s management.Indirect ownership, mainly involving financial institutions.
Percentage of OwnershipUsually a significant percentage, often with the aim of influencing management.Generally a minority stake without the intention of influencing management.Varies, but typically a minority stake.
Influence on ManagementIntends to influence and actively participate in the management and operations.Limited to financial interest, usually no intention to influence management.Varies; may or may not seek to influence management.
Nature of InstrumentsEquity shares, debentures, preference shares, etc.Securities like stocks, bonds, and other financial instruments.Similar to FPI, involving financial instruments.
Regulatory Body in IndiaRegulated by the Department for Promotion of Industry and Internal Trade (DPIIT).Regulated by the Securities and Exchange Board of India (SEBI).Regulated by SEBI.

Meaning of FDI

For FDI, the investment is through capital instruments by a person resident outside India:

Meaning of FPI

In an FPI, the investment is through capital instruments of a listed Indian company by a person resident outside India which is less than 10% of

Meaning of FII

Points to Note for FDI and FPI

Amendments in SEBI (Foreign Portfolio Investors) Regulations

SEBI (Foreign Portfolio Investors) Regulations, 2019

SEBI (Foreign Portfolio Investors) Regulations Amendment, (W.e.f: March, 2023)

Changes in FPI Regulations – Effective from March 15, 2023:

Amendments for Transparency:

Broader SEBI Powers:

Stricter Reporting Timelines:

Expanded Definition of ‘Material Change’:

Investor Group Details Maintenance:

DDP Responsibilities:

Additional Information for Compliance:

These changes aim to bring more transparency and accountability in the FPI registration process, ensuring accurate and timely reporting of relevant information.

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Conclusion

To sum up, the purpose of introducing the SEBI (Foreign Portfolio Investors) Regulations and the Operating Guidelines was to simplify the processes for FPI including compliance requirements. This regulation and the amendments will encourage new foreign portfolio investment participants in India.

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