SEBI Circular on Simplified Registration for Foreign Portfolio Investors

Introduction and Background

Recently, the Securities and Exchange Board of India (“SEBI”) introduced a new circular dated November 12, 2024 to simplify the registration process for Foreign Portfolio Investors (“FPI”). Portfolio investment is a lucrative option to diversify one’s investments. By spreading out investments across different assets, the risk of losing a substantial portion of money due to the poor performance of one asset is minimised. Registration of FPI is a significant process that enables investors to have the flexibility to adjust their portfolios effectively with changing market conditions. 

Earlier this year, SEBI via its master circular dated May 30, 2024 mandated inter alia for every applicant to submit a duly filed and signed Common Application Form (“CAF”) along with the annexures supported by required documents for registration. After a discussion with market participants, it was represented that information related to certain Investment Managers (“IM”) is already captured in depositories’ CAF module in specific cases where funds, sub-funds, and schemes are already registered as an FPI. Furthermore, there are specific fields exclusive to individual FPI applicants which are not relevant for applicants belonging to the above-specified cases.

Accordingly, SEBI released the aforesaid circular to facilitate ease of onboarding for FPI applicants and reduce duplication of already available information.

Key Features of the Circular

Abridged CAF

In case of any onboarding applicant belonging to the following category namely:

1. fund(s) operated by investing/non-investing IM, wherein such IM or any fund operated by IM, is already registered as FPI;
2. sub-fund(s) of a master fund, wherein such master fund or any sub-fund of such master fund, is already registered as FPI;
3. sub-fund(s) or separate class(es) of shares or equivalent structure(s) with segregated portfolio of a fund, wherein such fund or any of its sub-fund or separate class of shares or equivalent structure with segregated portfolio, is already registered as FPI;
4. scheme(s) of insurance companies wherein the parent entity or any scheme of insurance company is already registered as FPI,

the applicant may be provided with an option to fill the entire CAF or fill an abridged version of CAF where he can fill only those fields that are unique to him. The remaining fields shall be either auto populated from existing information in the CAF module or shall be disabled, as applicable.

The circular further provides for obtaining explicit consent to use the available information and imposes obligations on Designated Depository Participants (“DDPs”) to update the details in CAF against such applicants. DDPs shall also ensure that the CAF module hosted on its website shall reflect complete information.

Custodians and Designated Depository Participants Standards Setting Forum (“CDSSF”)

The circular also provides that implementation standards along with fields that can be auto populated from the CAF module or be disabled, should be formulated by the pilot CDSSF in consultation with SEBI.

Conclusion

The provisions of the aforesaid circular shall come into force after three months from the date of the circular. By allowing certain categories of FPIs to fill an abridged CAF, the process of registration will become more efficient and time-saving. It will further prevent repetitive information from being recorded again. The simplified registering process will facilitate easier onboarding of FPIs, potentially attracting more foreign investments in the country.