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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

A foreign pension fund, regulated in its home country, invests in listed Indian equities through a SEBI-registered entity category under which it is registered through a designated depository participant. Which statement correctly describes this investor's status?

The pension fund is a foreign portfolio investor. Foreign entities such as pension funds investing in listed Indian securities register as FPIs through a designated depository participant, and the investment is portfolio in nature rather than for control. It is not a broker, merchant banker or venture capital fund.

  1. AIt is a foreign portfolio investor, which invests in securities but does not seek control over the companyCorrect
  2. BIt is a venture capital fund, because it is foreign
  3. CIt is a merchant banker, because it deals in large amounts
  4. DIt is a stock broker, because it buys listed shares

Explanation

Foreign pension funds investing in listed Indian securities register as foreign portfolio investors through a designated depository participant. Their investment is portfolio in nature, not for control. Being foreign or large does not make an entity a venture fund or merchant banker, and buying shares does not make it a broker, which executes trades for others.

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