Regulation 4 - Eligibility criteria of foreign portfolio investor - Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

Eligibility criteria of foreign portfolio investor. 4. 4 [ (1) ] The designated depository participant shall not consider an application for grant of certificate of registration as a foreign portfolio investor unless the applicant satisfies the following conditions namely,- (a) the applicant is a person not resident in India; (b) the applicant is resident of a country whose securities market regulator is a signatory to International Organization of Securities Commission s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the Board: [Provided that an applicant falling under Category I foreign portfolio investor, as defined in clause (a) of Regulation 5, shall be considered as eligible for registration, if the applicant is a resident in a country as may be approved by the Government of India.] 1 (c) the applicant being a bank, is a resident of a country whose central bank is a member of Bank for International Settlements; (d) the applicant is not resident in a country identified in the public statement of Financial Action Task Force as: (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies; (e) the applicant is not a non-resident Indian; 3 [ (ea) where non-resident Indians or overseas citizens of India or resident Indians are constituents of the applicant or an existing foreign portfolio investor - (i) the contribution of a single non-resident Indian or overseas citizen of India or resident Indian shall be below twenty-five percent. of the total contribution in the corpus of the applicant or the existing foreign portfolio investor; (ii)the aggregate contribution of non-resident Indians, overseas citizens of India and resident Indians shall be below fifty percent. of the total contribution in the corpus of the applicant or the existing foreign portfolio investor; Explanation: The contribution of Resident Indian is permitted if made through the Liberalised Remittance Scheme (LRS) approved by Reserve Bank of India in global funds whose Indian exposure is less than 50%. (iii) the non-resident Indians, overseas citizens of India and resident Indians shall not be in control of the applicant or of the existing foreign portfolio investor: Nothing contained in sub-clause (iii) shall apply if the applicant or an existing foreign portfolio investor is an offshore fund for which No Objection Certificate has been issued by the Board in terms of the Securities and Exchange Board of India (Mutual Funds) Regulations , 1996, or is controlled by an Investment Manager which is controlled and/or owned by non-resident Indian or overseas citizen of India or resident Indian if the following conditions are satisfied: I. such Investment Manager is appropriately regulated in its home jurisdiction and registered with the Board as a non-investing foreign portfolio investor, or II. such Investment Manager is incorporated or setup under the Indian laws and appropriately registered with the Board . Nothing contained in clause (ea) shall apply to non-investing foreign portfolio investor or if the applicant or an existing foreign portfolio investor proposes to invest or invests only in units of schemes floated by mutual funds in India . (eb) the applicant and an existing foreign portfolio investor and their underlying investors contributing twenty-five percent. or more in the corpus of the applicant or existing foreign portfolio investor or identified on the basis of control, shall not be persons mentioned in the Sanctions List notified from time to time by the United Nations Security Council and shall not be from a jurisdiction which is identified in the public statement of the Financial Action Task Force as: (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies. ] (f) the applicant is legally permitted to invest in securities outside the country of its incorporation or establishment or place of business; (g) the applicant is authorized by its Memorandum of Association and Articles of Association or equivalent document(s) or the agreement to invest on its own behalf or on behalf of its clients; (h) the applicant has sufficient experience, good track record, is professionally competent, financially sound and has a generally good reputation of fairness and integrity; (i) the grant of certificate to the applicant is in the interest of the development of the securities market; (j) the applicant is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; and (k) any other criteria specified by the Board from time to time. 2 [Provided that, in respect of a Category I or Category II foreign portfolio investor, as defined in clause (a) or clause (b) of Regulation 5, clauses (f), (g) (h)and (i) of this regulation shall not be applicable.] 5 [ (2)(1) An applicant or an existing foreign portfolio investor shall comply with clause (ea) of sub-regulation (1) within a period of two years from the date of coming into force of this regulation or from the date of registration, whichever is later. (2) An existing foreign portfolio investor shall comply with clause (eb) of sub-regulation (1) within a period of three months from the date of coming into force of this regulation. (3) A foreign portfolio investor who remains non-compliant even after the period specified in clauses (1) and (2) of this sub-regulation shall be prohibited from making any fresh purchase of securities and such foreign portfolio investor shall liquidate its existing position in the Indian securities market within a period of one hundred and eighty days. (4) In case of temporary breach of investment limits specified in clause (ea) of sub-regulation (1), the foreign portfolio investor shall comply with the eligibility conditions within ninety days of the breach and in case the foreign portfolio investor remains non-compliant with the said requirement even after ninety days, then no fresh purchases shall be permitted and such foreign portfolio investor shall liquidate its existing position in Indian securities market within a period of the next one hundred and eighty days. ] Explanation.-For the purposes of this regulation: 6 [ (i) The term person shall have the same meaning as assigned to it under the Foreign Exchange Management Act, 1999; (ii) The terms non-resident Indian and overseas citizen of India shall have the same meaning as assigned to such terms under regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India ) Regulations , 2017 made under the Foreign Exchange Management Act, 1999; (iii) The term resident in India shall have the same meaning assigned to the term person resident in India under the Foreign Exchange Management Act, 1999. ] (iv) Bilateral Memorandum of Understanding with the Board shall mean a bilateral Memorandum of Understanding between the Board and the overseas regulator that, inter alia, provides for information sharing arrangements under clause (ib) of sub section (2) of Section 11 of the Act. ************** NOTES:- 1 Inserted by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2018, w.e.f. 05-04-2018. 2 Inserted by the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations, 2018, w.e.f. 05-04-2018. 3. Inserted vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 4. Numbered vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 5. Inserted vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 6. Substituted vide Notification No. SEBI/LAD-NRO/GN/ 2018 /58 dated 31-12-2018 before it was read as, (i) The term person shall have the same meaning as assigned to it under section 2 (31) of the Income-tax Act, 1961; (ii) The term non-resident shall have the same meaning as assigned to it under the Income-tax Act, 1961; (iii) The term resident in India shall have the same meaning as assigned to it under the Income-tax Act, 1961;