Dawn of a new regime for foreign portfolio investors

The Securities and Exchange Board of India (SEBI) notified the SEBI (Foreign Portfolio Investors) Regulations, 2014, on 7 January, merging the legal regimes for foreign institutional investors (FIIs) and qualified foreign investors (QFIs) into a single regime for foreign portfolio investors (FPIs).

Though most offshore private equity (PE) funds invest under the foreign direct investment (FDI) or foreign venture capital investment window, PE funds sometimes also invest in listed securities. For such investments, the new FPI regime would be of significant relevance.

Existing FIIs/sub-accounts and QFIs may continue to operate under the FPI regime on the payment of a conversion fee. However, awaiting corresponding changes to the Reserve Bank of India regulations, SEBI has kept the window open for transactions by existing FIIs/sub-accounts and for fresh registrations by prospective investors until 31 March 2014, extendable until 30 June 2014.

Siddharth Shah is a partner and Divaspati Singh is a senior associate at Khaitan & Co. Views of the authors are personal and should not be considered as those of the firm.