The Securities and Exchange Board of India has notified that overseas companies owned by NRIs or persons of Indian origin (PIOs) can act as investment manager for newly created class of overseas investors, namely foreign portfolio investors (FPIs).
However, the market regulator stated that the company should be well regulated in their jurisdiction to get registered as Category II FPI for acting as investment manager for other FPIs. At present, a company which is majority owned by one or more NRI/PIOs is not eligible to make investments as a foreign portfolio investor (FPI).
FPI includes all foreign institutional investors (FIIs), their sub-accounts and qualified foreign investors (QFI) under a new regime which has been effective from June 1. The FPIs are divided into three categories as per their risk profile and know your client (KYC) requirements. Category-I FPIs is the lowest risk category and includes foreign governments and government-related foreign investors. Category-II FPIs include appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds, university-related endowments and pension funds. Category-III FPIs compromise all others not eligible under the first two categories.