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Foreign Institutional Investors (FII) include the following foreign based categories:
Pension Funds
Mutual Funds
Investment Trust
Investment Trusts
Banks
Endowments
University Funds
Foundations
Further, following entities proposing to invest on behalf of broad based funds, are also
eligible to be registered as FIIs:
Trustees
Ans. Sub-account includes those foreign corporations, foreign individuals, and institutions, funds
or portfolios established or incorporated outside India on whose behalf investments are proposed
to be made in India by a FII.
Ans. Designated Bank means any bank in India which has been authorized by the Reserve Bank
of India to act as a banker to FII.
Ans. Domestic Custodian means any entity registered with SEBI to carry on the activity of
providing custodial services in respect of securities.
Ans. Broad Based Fund means a fund established or incorporated outside India, which has at
least twenty investors with no single individual investor holding more than 10% shares or units
of the fund.
Provided that if the fund has institutional investor(s) it shall not be necessary for the fund
to have twenty investors.
Provided further that if the fund has an institutional investor holding more than 10% of
shares or units in the fund, then the institutional investor must itself be broad based fund.
FII REGISTRATION
1. Pension Funds
2. Mutual Funds
3. Insurance Companies
4. Investment Trusts
5. Banks
6. University Funds
7. Endowments
8. Foundations
Further, following entities proposing to invest on behalf of broad based funds, are also
eligible to be registered as FIIs:
3. Trustees
Q7. What are the parameters on which SEBI decides FII applicants’ eligibility?
Ans.
Q8. Which form needs to be filled in when applying for FII registration?
Ans.
Ans. US $ 5,000.
Q11. When is the registration fee payable?
Ans. Demand Draft in favour of "Securities and Exchange Board of India" payable at New York
Ans. SEBI generally takes seven working days in granting FII registration. However, in cases
where the information furnished by the applicants is incomplete, seven days shall be counted
from the days when all necessary information sought, reaches SEBI.
In cases where the applicant is bank and subsidiary of a bank, SEBI seeks comments from the
Reserve Bank of India (RBI). In such cases, 7 working days would be counted from the day
no objection is received from RBI.
Ans. The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to be
renewed.
Ans. Same as initial registration. Along with "Form A" and all the relevant documents, the
applicants are required to fill in additional form (Annexure 1) while applying for renewal.
Q19. What are 100 % debt FIIs/sub-accounts, and what is the process for their
registration?
Ans. 100 % debt FIIs are debt dedicated FIIs which invest in debt securities only. The procedure
for registration of FII/sub-account, under 100% debt route is similar to that of normal funds
besides a clear statement by the applicant that it wishes to be registered as FII/sub-account under
100% debt route.
Note: In case the applicant is a ‘Bank’ or "Subsidiary of a Bank" then the application form
and relevant documents need to be submitted in duplicates.
SUB-ACCOUNT REGISTRATION
Ans.
c. Foreign Corporates
d. Foreign Individuals
Ans. The FII should apply on the behalf of the Sub-account. Both the FII and the Sub-account
are required to sign the Sub-account application form.
Q23. Which form needs to be filled when applying for sub-account registration?
Ans. US $ 1,000
Ans. Demand Draft in the name of "Securities and Exchange Board of India" payable at New
York
Ans. SEBI generally takes three working days in granting FII registration. However, in cases
where the information furnished by the applicants is incomplete, three days shall be counted
from the days when all necessary information sought, reaches SEBI.
Ans. The validity of sub-account registration is co-terminus with the FII registration under which
it is registered.
POST-REGISTRATION PROCESSES
Q33. What is the procedure in case the FII/sub-account changes its name?
Ans. If a registered FII/sub-account undergoes name change, then the FII need to promptly
inform SEBI about the change. It should also mention the reasons for the name change and give
an undertaking that there has been no change in beneficiary ownership.
In case of name change of FII, the request should be accompanied with documents from home
regulator and registrar of the company evidencing approval of name change, and the original FII
registration certificate issued by SEBI should be sent back for necessary amendment.
Q34. What is the procedure for transferring a sub-account from one FII to another?
Ans. The FII to whom the Sub-account is proposed to be transferred has to send a request along
with a declaration that it is authorized to invest on behalf of the Sub-account. The transferor FII
should also submit a No-objection certificate.
Ans. The FII should send a request, along with no-objection certificate from existing domestic
custodian, for change in domestic custodian.
Ans. Yes, the FII would be required to send a request for cancellation of its registration or
registration of its Sub-account/s clearly mentioning the name and registration number of the
entity. The FII should ensure that it / Sub-account has nil cash / securities holdings.
Ans. The registration of the FII / Sub-account would get expired at due date and it would not be
allowed to trade in Indian securities markets. If it is not interested in renewal but has certain
residual assets, it can apply for disinvestment in terms of Circular No. FITTC/CUST/12/2001
dated June 04, 2001 and abide by the guidelines specified in this regard.
INVESTMENT OPPORTUNITIES
Ans.
e. Commercial papers.
a. FII, on its own behalf, shall not invest in equity more than 10% of total issued
capital of an Indian company.
b. Investment on behalf of each sub-account shall not exceed 10% of total issued
capital of an India company.
These limits are within overall limit of 24% / 49 % / or the sectoral caps a prescribed by
Government of India / Reserve Bank of India.
Ans. The FII investments in debt securities are governed by the policy if the Government of
India. Currently following limits are in effect:
Ans.
Ans.
c. In the name of "FII a/c sub-account" when making investments on behalf of Sub-
account.
Ans.
The FII position limits in a derivative contract on a particular underlying stock i.e. stock
option contracts and single stock futures contracts are:
o For stocks in which the market wide position limit is less than or
equal to Rs. 250 Cr, the FII position limit in such stock shall be
20% of the market wide limit.
o For stocks in which the market wide position limit is greater than
Rs. 250j Cr, the FII position limit in such stock shall be Rs. 50 Cr.
FII position limit in all index options contracts on a particular underlying index shall be
Rs. 250 Crore or 15 % of the total open interest of the market in index options, whichever
is higher, per exchange.
This limit would be applicable on open positions in all option contracts on a particular
underlying index.
FII position limit in all index futures contracts on a particular underlying index shall be
Rs. 250 Crore or 15 % of the total open interest of the market in index futures, whichever
is higher, per exchange.
This limit would be applicable on open positions in all futures contracts on a particular
underlying index.
In addition to the above, FIIs shall take exposure in equity index derivatives subject to
the following limits:
The notional value of gross open position of a FII in exchange traded interest rate
derivative contracts shall be:
i. US $ 100 million.
ii. In addition to the above, the FII may take exposure in exchange traded in
interest rate derivative contracts to the extent of the book value of their
cash market exposure in Government Securities.
The position limits for a Sub-account in near month exchange traded interest rate
derivative contracts shall be higher of:
Rs. 100 Cr
or
15% of total open interest in the market in exchange traded interest rate
derivative contracts.
Ans. Yes, FII/sub-account may issue, deal in or hold off-shore derivative instruments such as
Participatory Notes, Equity Linked Notes or any other similar instruments against underlying
securities, listed or proposed to be listed on any stock exchange in India.
Ans.
d. Any entity that is a member of securities or futures exchanges such as the New
York Stock Exchange (Sub-account), London Stock Exchange (UK), Tokyo Stock
Exchange (Japan), NASD (Sub-account) or other similar self-regulatory securities
or futures authority or commission within any country, state or territory provided
that the aforesaid mentioned organizations which are in the nature of self
regulatory organizations are ultimately accountable to the respective securities /
financial market regulators.
Q46. What are the reporting Requirements for the FII / Sub-account issuing
Participatory Notes?
Ans.
a. FII/sub-account who issue/renew/cancel/redeem PNs, require to report on
Monthly basis. The report should reach SEBI by the 7th day of the following
month.
b. The FII/sub-account merely investing/subscribing in/to the Participatory
Notes/Access Products/Offshore Derivative Instruments or any such type of
instruments/securities with underlying Indian market securities are required to
report on quarterly basis (Jan-Mar, Apr-Jun, Jul-Sep and Oct-Dec).
c. FIIs/sub-accounts who do not issue PNs but have trades/holds Indian securities
during the reporting quarter (Jan-Mar, Apr-Jun, Jul-Sep and Oct-Dec) require to
submit 'Nil' undertaking on a quarterly basis.
d. FIIs/sub-accounts who do not issue PNs and do not have trades/ holdings in
Indian securities during the reporting quarter. (Jan-Mar, Apr-Jun, Jul-Sep and Oct-
Dec): No reports required for that reporting quarter.
Ans.
Market regulator Security Exchange Board of India recently announced new rules for foreign
investments through financial instruments such as participatory notes, asking FIIs to wind up P-
Notes for investing in derivatives within 18 months.
In derivatives, foreign institutional investors (FIIs) and their sub-accounts cannot issue fresh P-
Notes and will have to wind up their current position in 18 months.
In spot market, FIIs will not be allowed to issue P-Notes more than 40 per cent of their assets
under custody. The reference date for calculating such assets will be September 30.
Those FIIs who have issued P-Notes of more than 40 per cent of their assets could issue such
instruments only if they cancel, redeem, or close their existing PNs. Those FIIs who have issued
P-Notes less than 40 per cent of their assets under custody can issue additional instruments at the
rate of 5 per cent of their assets.
P-Notes are instruments like contract notes issued by FIIs to overseas investors who cannot
directly invest in equity market as they are not registered. Out of over 1,100 FIIs registered with
SEBI, only 34 have been issuing PNs.