In exercise of the powers conferred

## Report on the Securities and Exchange Board of India Foreign Portfolio Investors Amendment Regulations, 2021 **1. Executive Summary:** This report analyzes the Securities and Exchange Board of India (SEBI) Foreign Portfolio Investors (FPI) Amendment Regulations, 2021, as published in the Gazette of India on August 3, 2021. This amendment modifies the Securities and Exchange Board of India Foreign Portfolio Investors Regulations, 2019. The core purpose of the amendment is to revise the eligibility criteria for constituents of FPI applicants, specifically addressing the inclusion of resident Indians. The key change involves permitting certain resident Indians, other than individuals, to be constituents of FPI applicants, subject to specific conditions related to their eligibility as fund managers and the applicant's status as an eligible investment fund under the Income Tax Act, 1961. This report provides an overview of the changes, their implications, and the target audience. **2. Introduction:** The purpose of this report is to provide an informative analysis of the Securities and Exchange Board of India (SEBI) Foreign Portfolio Investors Amendment Regulations, 2021, based solely on the text provided. This analysis aims to clarify the changes introduced by the amendment, their rationale, and their potential impact on relevant stakeholders. **3. Policy Overview:** * The amendment modifies the Securities and Exchange Board of India Foreign Portfolio Investors Regulations, 2019. * **Core Objective:** The amendment's objective is to broaden the scope of eligible constituents of Foreign Portfolio Investor (FPI) applicants by allowing certain resident Indian entities, other than individuals, to participate, subject to specific conditions. **4. Background and Rationale:** This amendment seems designed to address the limitations on resident Indian participation within FPI applicant structures. The original regulations likely restricted or did not explicitly allow for the inclusion of resident Indian entities (other than individuals) as constituents of FPIs. This amendment aims to allow for greater participation of eligible Indian fund managers and investment funds in the FPI framework, potentially fostering increased domestic expertise and investment within the foreign portfolio investment ecosystem. **5. Key Provisions / Changes:** This section focuses specifically on the changes introduced by the amendment: * **Specific Part of Original Policy Changed:** Regulation 4, clause (c) of the Securities and Exchange Board of India Foreign Portfolio Investors Regulations, 2019, is being substituted. * **New Rule/Provision:** The amended clause (c) states: * Non-resident Indians (NRIs) or overseas citizens of India (OCIs) or resident Indian individuals may be constituents of the applicant provided they meet the conditions specified by the Board from time to time. * *Provided that* resident Indian other than individuals, may also be constituents of the applicant, subject to the following conditions: * The resident Indian (other than individuals) is an eligible fund manager of the applicant, as provided under subsection 4 of section 9A of the Income Tax Act, 1961. * The applicant is an eligible investment fund as provided under subsection 3 of section 9A of the Income Tax Act, 1961, which has been granted approval under the Income Tax Rules, 1962. * **Difference/Effect of the Change:** The amendment *adds* a provision allowing resident Indian entities (other than individuals) to be constituents of FPI applicants. This is a significant expansion of the eligibility criteria, provided they meet the specified conditions relating to fund manager eligibility and investment fund approval under the Income Tax Act, 1961 and Income Tax Rules, 1962. It opens avenues for certain domestic Indian financial entities to participate more directly in foreign portfolio investments. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders affected by these changes include: * **Existing and prospective Foreign Portfolio Investors (FPIs):** They need to understand the revised eligibility criteria for their constituents. * **Resident Indian Fund Managers:** Specifically, those that qualify as "eligible fund managers" under subsection 4 of section 9A of the Income Tax Act, 1961. * **Resident Indian Investment Funds:** Those that qualify as "eligible investment funds" under subsection 3 of section 9A of the Income Tax Act, 1961, and have received approval under the Income Tax Rules, 1962. * **Securities and Exchange Board of India (SEBI):** As the regulatory body, SEBI is responsible for implementing and enforcing these amended regulations. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Securities and Exchange Board of India (SEBI) is the responsible agency for implementing and overseeing these regulations. * **Timelines/Procedures:** The regulations came into force on the date of their publication in the Official Gazette (August 3, 2021). No specific procedures are detailed in the text itself, but it is implied that SEBI will provide further guidelines or clarifications as needed regarding the conditions specified for resident Indian constituents. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these specific changes is to: * **Increase participation of eligible Resident Indian entities in the FPI ecosystem.** * **Attract more foreign portfolio investment by providing greater flexibility and access to Indian expertise.** * **Potentially enhance the quality and sophistication of FPI management through the involvement of qualified Indian fund managers.** * **Deepen the integration of Indian financial markets with global markets.** **9. Conclusion:** The Securities and Exchange Board of India Foreign Portfolio Investors Amendment Regulations, 2021, represents a significant modification to the existing FPI regulations. By expanding the eligibility criteria for constituents of FPI applicants to include certain resident Indian entities, SEBI aims to foster greater participation and expertise within the FPI framework. This change has the potential to attract more foreign investment and deepen the integration of Indian financial markets with the global economy. Affected parties should familiarize themselves with the detailed conditions outlined in the amendment and any subsequent guidelines issued by SEBI.

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