SEBI issued FPI Regulations, 2024: Key Takeaways Simplified

Introduction

The Securities and Exchange Board of India (SEBI) issued the SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2024 on May 31, 2024, through a notification. The Amendment has substituted, inserted, and omitted various provisions in the SEBI (Foreign Portfolio Investors) Regulations, 2019 that address new compliances, registration fees, timely requirements, and penalties. These regulations are revised to regulate the governing framework of Foreign Portfolio Investors (FPI) in India.

Key Amendments by SEBI

Grace Period of 360-Days

In Regulation 7, which deals with a certificate of registration, sub-regulation (5) is substituted with a new proviso that states that a foreign portfolio investor, whose certificate of registration is not valid, can sell the securities or derivatives he is holding in India within 360 days from the commencement of these Amended regulations.

Registration Fee

Furthermore, a new sub-regulation (6) is also inserted into Regulation 7 which states that now an FPI has to mandatorily pay the registration fee every 3 years before the new period starts. This fee amount is listed in Part A of Schedule II. There is a bit of flexibility, though. FPIs can still be considered to have paid their fees if they pay the regular fee along with a late payment penalty within 30 days from the expiry of the preceding block.

The proviso to this sub-regulation also provides that if an FPI still does not pay the registration fee along with the late fee within 30 days of the previous period ending, they can still sell their existing investments in India. However, this also has an exception, in that they only have a grace period of 360 days (one year) from the end of the 30-day window to sell everything.

Changes in Disclosures Deadline

In Regulation 22, dealing with disclosure requirements, the words “as soon as possible but not later than seven working days” used in the sub-regulation (1) clause (b), clause (c), clause (e), and sub-regulation (5) are omitted. This change eliminates ambiguity because, without a clear deadline, FPIs may face uncertainty regarding the timeframe for making disclosures. This could lead to delays in reporting practices, potentially affecting the accuracy and timeliness of market information.

Penalty for Non-Compliance

Additionally, a proviso in Part A of the Second Schedule is inserted that states that a foreign portfolio investor who misses the registration fee deadline will be charged a late fee of US $50 per day for Category-I FPIS, and US $5 per day for Category-II FPIs.

Conclusion

These amendments hold considerable relevance for various stakeholders. The revised regulations provide clear and concise guidelines on registration fees, deadlines for disclosures, and the consequences of non-compliance. The tiered late fee structure encourages timely compliance and increases investor confidence, which can result in increased foreign capital inflows, thereby contributing to market stability and growth.

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