Markets regulator Sebi Friday issued revised KYC norms for foreign portfolio investors, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities.

Two circulars pertaining to KYC (Know Your Client) requirements and eligibility conditions for FPIs have been issued.

These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance.

NRIs, OCIs (Overseas Citizens of India) and RIs (Resident Indians) have been permitted to hold non-controlling stake in FPIs. There would also be no restriction on them to manage non-investing FPIs Sebi-registered offshore funds as well as registered investment managers, according to the regulator.

These entities would be allowed to be constituents of FPIs subject to certain conditions. If single and aggregate NRI/OCI/RI holding is below 25 per cent and 50 per cent, respectively, of the assets under management in the FPI, then such entities would be permitted to be constituents of the FPI.

According to Sebi, FPIs can be controlled by Investment Managers (IMs) which are controlled and/ or owned by NRI, OCI, or RI. In this regard, the conditions include that the investment manager is appropriately regulated in its home jurisdiction and registers itself with Sebi as non-investing FPI.

Among others, a non-investing FPI can be directly or indirectly owned or controlled by a NRI, OCI or RI.

“The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to FPIs which are 'offshore funds' for which no-objection certificate has been provided by the board in terms of mutual fund regulations,” Sebi noted.

Existing FPIs and new applicants would be given two years from the date of the new norms coming into force or date of registration, whichever is later. In case of temporary breach, a time period of 90 days would be given to ensure compliance.

The watchdog said that FPIs under category II and III have to maintain a list of beneficial owners and the same has to be provided to it.

Further, additional KYC documentation requirements for beneficial owners have been done away with for government-related entities that come under Category I FPIs.

Beneficial owners are the natural persons who ultimately own or control an FPI. The FPIs have been categorised into three classes based on their risk profile.