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Mutual Funds

The FII is Dead. Long Live the FPI.


In what seems to be a love-hate relationship with Three Letter Acronyms (TLAs), SEBI has rejigged the concept of foreign investors in the securities markets.

There were Foreign Institutional Investors (FIIs), Sub-accounts of FIIs, and then Qualified Financial Investors (QFIs).

These will soon be history.

They will be combined into a single entity calls a Foreign Portfolio Investor (FPI).

FPIs don’t even need to register directly with SEBI. Designated Depository Participants (DDPs) will do the KYC (Know Your Customer) requirements and register them directly. I marvel at the sheer number of TLAs here.

KYC norms will be less stringent for Category 1 FPIs (Governments and Sovereign Wealth Funds), slightly more for Category 2 FPIs (Mutual Funds, Insurers, Pension Funds etc. that are regulated in their field) and most for Category 3 FPIs (other Corporates, Hedge funds etc).

If an FPI’s holding goes beyond 10% of the company, it will be classified as Foreign Direct Investment (FDI). This is yet another three letter acronym no body cares about but it looks really smart when you say it.

“We got FDI.”


“They started off as an FPI, and then they became FDI”.

“My goodness, that must be really smart of you.”

So yeah, we have something new. The only cool thing about it is that foreign investors don’t need to register with SEBI directly – the DDPs are likely to get things done faster. The downside: I have to change all my “FII” download scripts. (But you couldn’t possibly care).

HFA. (Have Fun Anyway)


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