The new class of investors, FPIs, would encompass all FIIs (Foreign Institutional Investors), their sub-accounts and Qualified Foreign Investors (QFIs), and would be divided in three categories as per their risk profile.
The KYC (Know Your Client) requirements and other registration procedures would be much simpler for FPIs compared to current practices.
The Sebi has also decided to grant them a permanent registration, as against the current practice of granting approvals for one year or five years to the overseas entities seeking to invest in Indian markets.
At a meeting held here today, the Sebi board approved the new Sebi (Foreign Portfolio Investors) Regulations, 2013 to bring about these wide-ranging changes.
Sebi said in a statement after the board meeting that the new regulations have been framed keeping in view the provisions of existing norms for FIIs and QFIs, as also the recommendations made by a 'Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments' chaired by former Cabinet Secretary K M Chandrasekhar.
Under the new norms, all existing FIIs, Sub Accounts and QFIs will be eventually merged into this new investor class to be known as FPIs.
Sebi also approved setting up 'Designated Depository Participants (DDPs)', which would register FPIs on behalf of the market regulator subject to compliance with KYC norms.
Sebi had last month already issued instructions regarding risk-based KYC for FPIs, as per their risk categories.
The Category I FPIs, which would be the lowest risk entities, would include foreign governments and government related foreign investors, "Category II' FPIs would include "appropriately regulated broad based funds, appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds, university related endowments, pension funds etc".
The Category III FPIs would include all others not eligible under the first two categories,
Sebi said that all existing FIIs and Sub Accounts may continue to buy, sell or otherwise deal in securities under the FPI regime.
All existing QFIs can also continue to buy, sell or otherwise deal in securities till the period of one year from the date of notification of this regulation. In the meantime, they may obtain FPI registration through DDPs.