Unit study guide · NISM Series VI
Foreign Portfolio Investors (FPI)
4 questions in this unit
What this unit covers
- Under the FPI Regulations, who grants an eligible applicant its FPI registration certificate on behalf of SEBI?
- An otherwise eligible sovereign wealth fund applies for FPI registration as a government-related investor. Which category is specified for this type under Regulation 5?
- A large overseas institution applies as an FPI but its eligibility review raises sanctions and beneficial-ownership concerns. Does its size permit the DDP to ignore those concerns?
- An FPI states that its registration certificate alone allows every proposed Indian securities transaction, regardless of instrument-specific restrictions. Which response is correct?
Key ideas
From the practice bank · 1
Under the FPI Regulations, who grants an eligible applicant its FPI registration certificate on behalf of SEBI?
The designated depository participant grants the certificate on SEBI’s behalf after satisfying itself that the applicant meets the requirements. This is a specific approved regulatory role, not a power held automatically by every entity that offers an ordinary demat or trading account. Remember: A designated DP role is distinct from merely servicing a demat account.
Hint Common mistake: Assuming any DP or broker can register an FPI without the required designation.
VI-141From the practice bank · 2
An otherwise eligible sovereign wealth fund applies for FPI registration as a government-related investor. Which category is specified for this type under Regulation 5?
Regulation 5 includes government and government-related investors, including sovereign wealth funds, within Category I, subject to the applicable requirements. The applicant’s type and regulatory characteristics matter. Foreign status alone does not place every investor into the same residual category. Remember: Apply the category definition to the actual applicant type.
Hint Common mistake: Using an obsolete FPI classification or classifying all foreign investors identically.
VI-142From the practice bank · 3
A large overseas institution applies as an FPI but its eligibility review raises sanctions and beneficial-ownership concerns. Does its size permit the DDP to ignore those concerns?
The FPI framework contains eligibility and due-diligence requirements, including relevant jurisdictional, sanctions, underlying-investor/control and fit-and-proper conditions. Size or institutional status does not create an automatic blanket exemption. The DDP must apply the relevant provisions and any valid exemptions specifically rather than invent a large-investor waiver. Remember: Assess exemptions by the actual rule, not by customer prominence.
Hint Common mistake: Relaxing eligibility checks because an applicant is commercially attractive.
VI-143From the practice bank · 4
An FPI states that its registration certificate alone allows every proposed Indian securities transaction, regardless of instrument-specific restrictions. Which response is correct?
FPI registration admits the investor to the regulatory framework. It is not an exemption from that framework. Permitted investments, applicable limits, custodial arrangements and continuing duties must still be observed. Operational ability to record a security does not establish legal permission for every proposed investment. Remember: Investor registration and permission for a particular investment are separate checks.
Hint Common mistake: Treating onboarding approval as blanket approval of all future instructions.
VI-144