Appendix 73
Issued by Securities and
Exchange Board of India vide File No.SEB1/LE/95; Notification No. 918(E) dated
14‑11‑1995
S.O.
918ffl‑In exercise of the powers conferred by section 30 of the Securities
and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby, makes the
following regulations, namely
1. Short tide and
commencement
(1)
These regulations may be called the Securities
and Exchange Board of India (Foreign Institutional Investors) Regulations,
1995.
(2)
They shall come intoforce on the date of their publication in the Official
Gazette.
2. Definitions
In
these regulations, unless the context otherwise requires,
(a) "Act” means the Securities
and Exchange Board of India Act, 1992 (15 of 1992);
(b)"certificate" means a certificate of registration granted
by the Board under these regulations;
(c)"designated bank" means any bank in India, which has been
authorised by the Reserve Bank of India to act as a banker to Foreign
Institutional Investors;
'[(cc)"domestic asset management company" means an asset
management company approved by the Board under the Securities and Exchange
Board of India (Mutual Funds) Regulation, 1996, and who has been granted certificate
of registration under the Securities and Exchange Board of India (Portfolio
Managers) Regulations, 1993.1
(d)"domestic custodian" includes any person carrying on the
activity of providing custodial services in respect of securities;
[(dd)"domestic portfolio manager" means a portfolio manager
registered under the Securities and Exchange Board of India (Portfolio
Managers) Regulations, 19931. _
(e)"equity officee' means any officer of the Board, or any other
person appointed by the Board under Chapter V of these regulations;
(f)"Foreign Institutional Investor" means an institution
established or incorporated outside India which proposes to make investment in
India in securities;
[Provided that a domestic asset management company or domestic portfolio
manager who manages funds raised or collected or brought from outside India for
investment in India on behalf of a sub‑account, shall be deemed to be a
Foreign Institutional Investor.]
(g) "form" means a form specified in the First Schedule
to these regulations;
(h) "Government of India
Guidelines" means the guidelines dated September 14, 1992 issued by the
Government of India for Foreign Institutional Investors, as amended from time
to time;
(i) "institution" includes every artificial judicial person;
(j) "schedule" means a schedule to these regulations;
(k) "sub‑account" includes
foreign Corporate or foreign individuals and those institutions, established or
incorporated outside India and those funds, or portfolios, established outside
India, whether incorporated or not, on whose behalf investment are proposed to
be made in India by a Foreign Institutional Investor.
3. Application for
certificate
(1) No person shall buy, sell or otherwise
deal in securities as a Foreign Institutional Investor unless he holds a
certificate granted by the Board under these regulations.
(2) An application for the grant of
certificate shall be made to the Board in Form A.
(3) Notwithstanding anything contained in
sub‑regulation (2), any Foreign Institutional Investor who has made an
application for the grant of a certificate to the Board prior to the
commencement of these regulations shall be deemed to have made an application
under sub‑regulation (2) and the application shall be accordingly dealt
with under these regulations.
(4) Notwithstanding anything contained
hereinabove, any person who has before the commencement of these regulations,
made an application for registration and has been granted registration by the
Board, under the Government of India Guidelines to act as a Foreign
Institutional Investor shall be deemed to have made an application under sub‑regulation
(2) above may continue to buy, sell or otherwise deal in securities subject to
the provisions of these regulations, till the grant or refusal of a certificate
under the regulations.
4. Furnishing of
information, clarification and personal representation
(1) The Board may require the applicant to
furnish such further information or clarification as the Board considers
necessary regarding matters relevant to the activities of the applicant for
grant of certificate.
(2) The applicant or his authorised
representative shall, if so required by the Board, appear before the Board for
personal representation in connection with the grant of a certificate.
5. Application to conform
to the requirements
Subject to the
provisions of sub‑regulation (3) and sub‑regulation (4) of
regulation 3, any application, which is not complete in all respects and does
not conform to the instructions specified in the form or is false or misleading
in any material particular, shall be rejected by the Board:
Provided that,
before rejecting any such application, the applicant shall be given a
reasonable opportunity to remove, within the time specified by the Board, such
objections as may be indicated by the Board.
6. Consideration of
application
(1) For the purpose of the grant of
certificate the Board shall take into account all matter which are relevant to
the grant of a certificate and in particular the following, namely:
(a) the
applicant's track record, professional competence, financial soundness,
experience, general reputation of fairness and integrity;
(b) whether the applicant is regulated by an
appropriate foreign regulatory authority.
(c) whether the applicant has been granted
permission under the provisions of the Foreign Exchange Regulation Act, 1973
(46 of 1973) by the Reserve Bank of India for making investments in India as a
Foreign Institutional Investor;
(d) whether the applicant is
(i) an institution established or
incorporated outside India as Pension Fund or Mutual Fund or Investment Trust;
or
(ii) an Asset Management Company or Nominee
Company or Bank or Institutional Portfolio Manager, established or incorporated
outside India and proposing to make investment in India on behalf of broad
based funds and its proprietary funds, if any; or
(iii) a Trustee or a Power of Attorney holder,
incorporated or established outside India, and proposing to make investments in
India on behalf of broad based funds and its proprietary funds, if any.
Explanation.‑For
the purposes of this regulation, "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 ten per cent of the shares or
units of the fund:
Provided that if
the broad based fund has institutional investor(s) it shall not be necessary
for the find to have twenty investors:
Provided further
that if the broad based fund has an institutional investor who holds more than
ten per cent of the shares or units in the fund, then the institutional
investor must itself be a broad based fund; or
(iv) university fund, endowments, foundations
or charitable trusts or charitable societies:
Provided that
while considering the application from applicants under clause (iv) the Board
may taken into account the following, namely
(a) whether the applicant has been in
existence for a period of at least 5 years;
(b) whether it is legally permissible for
the applicant to invest in securities outside the country of its incorporation
or establishment;
(c) whether the applicant has been
registered with any statutory authority in the country of their incorporation
or establishment;
(d) whether any legal proceeding has been
initiated by any statutory authority against the applicant.
(e) whether the grant of certificate to the
applicant is in the interest of the development of the securities market.
(f) whether the applicant is a fit and
proper person.
(2)
(a) A domestic portfolio manager or domestic
asset management company shall be eligible to be registered as a foreign
institutional investor to manage the funds of sub‑accounts;
(b) the domestic portfolio manager or
domestic asset management company shall make an application in terms of
regulations 3, 4 and 5;
(c) for the grant of certificate to domestic
asset management company or to a domestic portfolio manager the Board shall
consider the following
(i) whether the applicant is an approved
asset management company or a registered portfolio manager and that the
approval or registration is valid;
(ii) whether any disciplinary proceeding is
pending before the Board against such applicant.
7. Procedure and grant of
certificate
Where an
application is made for grant of certificate under these regulations, the Board
shall, as soon as possible but not later than three months after information
called for by it is furnished, if satisfied that the application is complete in
all respects, all particulars sought have been furnished and the applicant is
found to be eligible for the grant of certificate, grant a certificate in Form
B, subject to payment of fees in accordance with the Second Schedule.
Provided that
the Board may exempt from the payment of fees, an applicant such as the World
Bank and other institutions established outside India for providing aid, and
which have been granted privileges and immunities from the payment of tax and
duties by the Central Government:
Provided further
that the Board shall refund the fees already collected from the institutions
which are exempted from the payment of fees by the proviso mentioned above.
Provided further
that a domestic portfolio manager or domestic asset management company shall
not be liable to pay fee.
8. Validity of certificate
The certificate
and each renewal thereof shall be valid for a period of five years from the
date of its grant or renewal, as the case may be.
Provided that in
the case of domestic portfolio manager or domestic asset management company the
certificate and each renewal thereof shall be valid for a period not exceeding
the validity of registration or approval granted under the Securities and
Exchange Board of India (Portfolio Managers) Regulations, 1996, as the case may
be:
Provided further
that the certificate of registration granted or approved under the Securities
and Exchange Board of India (Portfolio Managers Regulations, 1993, or the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996,
expires before the expiry of registration under these regulations, or the
certificate of such entity is suspended, the domestic portfolio manager or
domestic asset management company shall cease to carry on any activity as
foreign institutional investor and shall be subject to the directions of the
Board with regard to the funds, securities or records that may be in its
custody or control as a foreign institutional investor.
9. Application for renewal
of certificate
(1) Three months before the expiry of the
period of certificate, the Foreign Institutional Investor, if he so desires,
may make an application for renewal in Form A.
Provided that a
Foreign Institutional Investor who does not desire to renew its registration or
has failed to make an application for renewal under sub‑regulation (1),
shall, at the time of expiry of registration, obtain a specific permission from
the Board, for disinvesting the securities held by it on its own account or on
behalf of its sub‑account(s), within a stipulated time period, subject to
such terms and conditions as may be specified by the Board.
Provided further
that where a Foreign Institutional Investor does not desire to renew
registration of any of its sub‑account(s) or has failed to make an
application for renewal of registration of sub account(s), the Foreign
Institutional Investor shall at the time of expiry of registration, obtain, a
specific permission from the Board, for disinvesting the securities held by it
on behalf of sub account(s) within a stipulated time period, subject to such
terms and conditions as may be specified by the Board.
(2) The application for renewal under sub‑regulation
(1) shall, as far as may be, be dealt with in the same manner as if it were an
application made under sub‑regulation (2) of regulation 3 for grant of a
certificate.
(3) The Board shall, on such application, if
satisfied that the applicant fulfills the requirements specified in regulation
6, grant a certificate in Form B, subject to payment of fees in accordance with
the Second Schedule.
10. Conditions for grant or
renewal of certificate to Foreign Institutional Investors
The grant or
renewal of certificate to Foreign Institutional Investor shall be subject to
the following conditions namely:
(a) he shall abide by the provisions of these regulations;
(b) if any information or particulars
previously submitted to the Board are found to be false or misleading, in any
material respect, he shall forthwith inform the Board in writing;
(c) if there is any material change in the
information previously furnished by him to the Board, which has a bearing on
the certificate granted by the Board, he shall forthwith inform the Board;
(d) he shall appoint a domestic custodian
and before making any investments in India, enter into an agreement with the
domestic custodian providing for custodial services in respect of securities;
(e) he shall, before making any investments
in India, enter into an arrangement with a designated bank for the purpose of
operating a special non‑resident rupee or foreign currency account;
(f) before making any investments in India
on behalf of a sub‑account, if any, he shall obtain registration of such
sub‑account, under these regulations;
11. Procedure where
certificate is not granted
(1) Where an application for grant or
renewal of a certificate does not satisfy the requirements specified in
regulation 6, the Board may reject the application after giving the applicant a
reasonable opportunity of being heard.
(2) The decision to reject the application
shall be communicated by the Board to the applicant in writing stating therein
the grounds on which the application has been rejected.
(3) The applicant, who is aggrieved by the
decision of the Board under sub‑regulation (1) may, within a period of
thirty days from the date of receipt of communication under sub‑regulation
(2) apply to the Board for reconsideration of its decision.
(4) The Board shall, as soon as possible, in
the light of the submissions made in the application for reconsideration made
under sub‑regulation (3) and after giving a reasonable opportunity of
being heard, convey its decision in writing to the applicant.
12. Application for
registration of sub‑accounts
(1) A Foreign Institutional Investors shall
seek from the Board registration of each sub‑account on whose behalf he
proposes to make investments in India.
(2) Notwithstanding anything contained in
sub‑regulation (1) above, any sub‑account which has been granted
approval prior to the commencement of these regulations by the Board shall be
deemed to have been granted registration as a sub‑account by the Board
under these regulations.
(3) An application for registration as a sub‑account
shall contain particulars specified in para 1 of Annexure B to Form A of the
First Schedule.
13. Procedure and grant of
registration of sub‑accounts
(1) For the purpose of grant of registration
the Board shall take into account all matters which are relevant to the grant
of such registration to the sub‑account and in particular the following,
namely
(a) the applicant is an institution or fund
or portfolio established or incorporated outside India and proposes to make
investment in India;
(b) the applicant is a broad based fund or
proprietary funds or a foreign corporate or individual;
Provided that a non‑resident
Indian or an overseas corporate body registered with Reserve Bank of India
shall not be eligible to invest as sub‑account or as foreign
institutional investor.
(bb) the applicant is a fit and proper person.
(c) the Foreign Institutional Investor
through whom the application for registration is made to the Board holds a
certificate of registration as Foreign Institutional Investor; and
(d) the Foreign Institutional Investor
through whom an application for registration of sub account is made, is
authorised to invest on behalf of the sub‑account;
(e) the Foreign Institutional Investor
through whom the application for registration is made, has submitted
undertakings that the sub‑account fulfils the criteria referred to in
this sub regulation in a manner specified in para 2 of Annexure‑B to Form‑A
of the First Schedule
(ee) in case the sub‑account is a foreign
corporate or individual, the foreign institutional investor, through whom the
application for registration is made, shall furnish information and undertaking
as specified in para. 3 of Annexure B to Form A of the First Schedule.
(f) the sub‑account has paid
registration fees in accordance with the Second Schedule.
(2) The Board on receipt of the undertakings
and the registration fees as referred to in sub regulation (1), may grant
registration to the sub‑account.
(3) A sub‑account granted registration
in accordance with sub‑regulation (2) of this regulation shall be deemed
to be registered as a Foreign Institutional Investor with the Securities and
Exchange Board of India for the limited purpose of availing of the benefits
available to Foreign Institutional Investors under section 115AD of the Income‑tax
Act, 1961 (43 of 1961).
14. Commencement of
investment
A Foreign
Institutional Investor shall not make any investments in securities in India
without complying with the provisions of this Chapter.
15. Investment restrictions
(1) A Foreign Institutional Investor may invest only in the
following:
(a) securities in the primary and secondary
markets including shares, debentures and warrants of companies unlisted listed
or to be listed on a recognised stock exchange in India; and
(b) units of schemes floated by domestic
mutual funds including Unit Trust of India, whether listed on a recognised
stock exchange or not;
(c) dated Government securities;
(d) derivatives traded on a recognised stock
exchange.
(e) commercial paper
(2) Notwithstanding anything contained in
sub‑regulation (1) of this regulation, the total investments in equity
and equity related instruments (including fully convertible debentures
convertible portion of partially convertible debentures and tradeable warrants)
made by a Foreign Institutional Investor in India, whether on his own account
or on account of his sub‑accounts, shall not be less than seventy per
cent of the aggregate of all, the investments of the Foreign Institutional
Investor in India, made on his own account and on account of his sub‑accounts.
Provided that
nothing contained in sub‑regulation (2) shall apply to any investment of
the foreign institutional investor either or its own account or on behalf of
its sub‑accounts in debt securities which are unlisted or listed or to be
listed on any stock exchange if the prior approval of the Board has been
obtained for such investment.
Provided further
that the Board may, while granting approval for the investments impose
conditions as are necessary with respect to the maximum amount which can be invested
in the debt securities by the foreign institutional investor on its own account
or through its sub‑accounts.
provided further
that a foreign corporate or individual shall not be eligible to invest through
the hundred per cent debt route.
Explanation.‑ For the
purposes of the provisos to this sub‑regulation the expression "debt
securities" shall include dated Government securities commercial paper and
treasury bills.
(3) In respect of investments in the
secondary market, the following additional conditions shall apply:
(a) the Foreign Institutional Investor shall
transact business only on the basis of taking and giving deliveries of
securities bought and sold and shall not engage in short selling in securities:
Provided that
nothing contained in clause (a) shall apply in respect of transactions in
derivatives traded on a recognised stock exchange.;
(b) no transactions on the stock exchange
shall be carried forward;
(c) the transaction of business in
securities shall be only through stock brokers who has been granted a
certificate by the Board under sub‑section (1) of section 12 of the
Securities and Exchange Board of India Act, 1992:
Provided that
transactions in Government securities commercial paper including treasury bills
shall be carried out in a manner specified by the Reserve Bank of India.:
Provided further
that nothing contained in clause (c) shall apply to sale of securities by a
Foreign Institutional Investor in response to a letter of offer sent by an
acquirer in accordance with the Securities and Exchange Board of India
(Substantial Acquisitions of Shares and Takeovers) Regulations, 1997;
Provided further
that in case of offer by a company to buy back its securities, the foreign
institutional investor, may sale the securities held by it to such company, in
accordance with Securities and Exchange Board of India (Buy‑back of
Securities) Regulations, 1998.
(d) a Foreign Institutional Investor or a
sub‑account having an aggregate of securities which are worth rupees ten
crore or more, as on the latest balance sheet date, shall, subject to such
instructions as may be issued from time to time by the Board, settle their
transactions entered on or after January 15, 1998, only through dematerialized
securities.
(4) Unless otherwise approved by the Board, securities shall be
registered.
(a) in the name of the Foreign Institutional
Investor, provided the Foreign Institutional Investor is making investments on
his own behalf‑, or
(b) in his name on account of his sub‑account,
or in the name of the sub‑account, in case he is investing on behalf of
the sub‑account:
Provided that
the names of the sub‑accounts on whose behalf the Foreign Institutional
Investor is investing are disclosed to the Board by the Foreign Institutional
Investor.
(5) The purchase of equity shares of each
company by a Foreign Institutional Investor investing on his own account shall
not exceed ten per cent of the total issued capital of that company.
(6) In
respect of a Foreign Institutional Investor investing in equity shares of a
company on behalf of his sub‑accounts, the investment on behalf of each
such sub‑account shall not exceed 18[ten] per cent of the total issued
capital of that company.
Provided that in
case of foreign corporates or individuals, each of such sub‑account shall
not invest more than 5% of the total issued capital of the company in which
such investment is made.
(7) The investment by the Foreign
Institutional Investor shall also be subject to Government of India Guidelines.
(8) A Foreign Institutional Investor or sub‑account
may lend securities through an approved intermediary in accordance with the
stock lending scheme of the Board.
16. Appointment of domestic
custodian
(1) A Foreign Institutional Investor or a
global custodian acting on behalf ofthe Foreign Institutional Investor, shall
enter into an agreement with a domestic custodian to act as custodian of
securities for the Foreign Institutional Investor.
(2) The Foreign Institutional Investor shall
ensure that the domestic custodian takes steps for:
(a) monitoring of investment of the Foreign
Institutional Investor in India;
(b) reporting to the Board on a daily basis
the transactions entered into by the Foreign Institutional Investor;
(c) preservation for five years of records
relating to his activities as a Foreign Institutional Investor; and
(d) furnishing such information to the Board
as may be called for by the Board with regard to the activities of the Foreign
Institutional Investor and as may be relevant for the purpose of this
regulation.
(3) A Foreign Institutional Investor may
appoint more than one domestic custodian with prior approval of the Board, but
only one custodian may be appointed for a single sub‑account of a Foreign
Institutional Investor.
17. Appointment of
designated Bank
A Foreign
Institutional Investor shall appoint a branch of a bank approved by the Reserve
Bank of India for opening of foreign currency denominated accounts and special
non‑resident rupee accounts.
17A. Investment Advice in
publicly accessible media
1. A Foreign Institutional Investor or any
of his employees shall not render directly or indirectly any investment advice
about any security in the publicly accessible media, whether real‑time or
non real‑time, unless a disclosure of his interest including long or
short position in the said security has been made, while rendering such advice.
2. In case, an employee of the Foreign
Institutional Investor is rendering such advice, he shall also disclose the
interest of his dependent family members and the employer including their long
or short position in the said security, while rendering such advice.
18. Maintenance of proper
books of accounts, record, etc.
(1) Every Foreign Institutional Investor
shall keep or maintain as the case may be, the following books of accounts,
records and documents, namely:
(a) true and fair accounts relating to
remittance of initial corpus, for buying, selling and realizing capital gains
of investment made from the corpus;
(b) accounts of remittances to India for
investments in India and realising capital gains on investments made from such
remittances;
(c) bank statement of accounts,
(d) contract notes relating to purchase and
sale of securities; and
(e) communication from and to the domestic
custodian regarding investments in securities.
(2) The Foreign Institutional Investor shall
intimate to the Board in writing the place where such books, records and
documents will be kept or maintained.
19. Preservation of books of
accounts, records, etc.
Subject to the
provisions of any other law, for the time being in force, every Foreign
Institutional Investor shall preserve the books of accounts, records and
documents specified in regulation 18 for a minimum of five years.
19A. Appointment of Compliance
Officer
1. Every Foreign Institutional Investor
shall appoint a compliance officer who shall be responsible for monitoring the
compliance of the Act, rules and regulations, notifications, guidelines,
instructions etc. issued by the Board or the Central Government.
2. The compliance officer shall
immediately and independently report to the Board any noncompliance observed by
him.
20. Information to the Board
Every Foreign Institutional
Investor shall, as and when required by the Board of the Reserve Bank of India,
submit to the Board or the Reserve Bank of India, as the case may be, any
information, record or documents in relation to his activities as a Foreign
Institutional Investor as the Board or as the Reserve Bank of India may
require.
21. Cancellation or
suspension of certificate
(1) A Foreign Institutional Investor who
(a) fails to comply with any condition
subject to which certificate has been granted; or
(b) contravenes any of the provisions of the
Act or these regulations, shall be liable to the penalty of
(i) suspension of certificate for a
specified period; or
(ii) cancellation of certificate, after an
enquiry as provided for in these regulations has been held.
(2) The provisions of these regulations
shall be without prejudice to those of regulations 22 and 23.
22. Suspension of
certificate
A penalty of suspension of
certificate of Foreign Institutional Investor may be imposed if he
(a) indulges in fraudulent transactions in securities;
(b) fails to furnish any information related
to his transaction in securities as required by the Board or the Reserve Bank
of India;
(c) furnishes false information to the Board; or
(d) does not co‑operate in any enquiry conducted by the
Board.
23. Cancellation of
certificates
A penalty of cancellation of
certificate of a Foreign Institutional Investor may be imposed if he
(a) indulges in deliberate manipulation or
price rigging or cornering activities prejudicially affecting the securities
market or the investors' interest;
(b) is guilty of fraud or criminal offence, involving moral
turpitude;
(c) does not meet the
eligibility criteria laid down in these regulations;
(d) violates the provisions of the Securities
and Exchange Board of India (Insider Trading) Regulations, 1992 or of the
Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair
Trade Practices Relating to Securities Markets) Regulations, 1995, made under
the Act; or
(e) is guilty of repeated defaults of the nature mentioned in
regulation 22.
Explanation.‑In this
regulation, "fraud" shall have the same meaning as is assigned to it
in section 17 of the Indian Contract Act, 1872.
24. Manner of making order
of suspension and cancellation of certificate
No order of penalty of
suspension or cancellation of certificate shall be imposed on the Foreign
Institutional Investor except after holding an enquiry in accordance with the
procedure specified in regulations 25 and 26.
25. Manner of holding
enquiry
(1) For the purpose of holding the enquiry
referred to in regulation 24, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the
Foreign Institutional Investor a notice at the principal place of business of
the Foreign Institutional Investor stating out the default alleged to have been
committed by the Foreign Institutional Investor and calling upon him to show
cause why the penalties specified in regulation 21 should not be imposed on
him.
(3) The Foreign Institutional Investor may,
within thirty days from the date of receipt of such notice, furnish to the
enquiry officer a reply, together with copies of documentary or other evidence
relied on by him in support of its reply:
Provided that the enquiry officer
may call upon him to supply further information.
(4) The enquiry officer shall, give a
reasonable opportunity of hearing to the Foreign Institutional Investor to
enable him to make submission in support of his reply under sub‑regulation
(3) of this regulation.
(5) Before the enquiry officer, the Foreign
Institutional Investor may either appear in person or through any person duly
authorised by him in writing.
(6) If it is considered necessary, the
enquiry officer may ask the Board to appoint a presenting officer to present
its case.
(7) The enquiry officer shall, after taking
into account all relevant facts and submissions made by the Foreign
Institutional Investor and by the presenting officer, if appointed under sub‑regulation
(6) above, submit a report to the Board and record the penalty if any to be
awarded along with the justification for such penalty.
26. Show cause notice and
order
(1) On receipt of the report from the
enquiry officer, the Board shall consider the same and issue a show cause
notice to the Foreign Institutional Investor as to why the penalty, which it
considers appropriate and which shall be specified in the notice should not be
imposed.
(2) The Foreign Institutional Investor shall
within twenty‑one days of the date of the receipt of the show cause
notice referred to in sub‑regulation (1), of this regulation, send to the
Board a reply to the notice.
(3) The Board after considering the reply to
the show cause notice, if received in time, shall as soon as possible but not
later than thirty days from the receipt of the reply, if any, pass such order
as it deems fit.
(4) Every order passed under sub‑regulation
(3) of this regulation shall be self‑contained and give reasons for the
conclusions stated therein including the justification for the penalty, if any,
imposed by that order.
27. Effect of suspension and
cancellation of certificate
(1) On and from the date of the suspension
of certificate, if ordered under this Chapter, the Foreign Institutional
Investor shall cease to buy, sell or otherwise deal in securities in India
during the period of suspension.
(2) On
and from the date of cancellation of certificate, if ordered under this
Chapter, the Foreign Institutional Investor shall cease to buy, sell or
otherwise deal in securities in India, except for the purpose of liquidating
the existing investment.
28. Publication of order of
suspension and cancellation of certificate
The order of suspension or
cancellation of certificate under this Chapter shall be published by the Board
in at least two daily newspapers.
29. Appeal to the Securities
Appellate Tribunal
Any person aggrieved by an
order of the Board made, on and after the commencement of the Securities Laws
(Second Amendment) Act, 1999 (i.e., after 16th December, 1999), under these
regulations may prefer an appeal to a Securities Appellate Tribunal having
jurisdiction in the matter.
(Regulation 3)
SECURITIES AND EXCHANGE
BOARD OF INDIA
Mittal Court, 'B' Wing, 1st
Floor, Nariman Point, Bombay 400 021
1. Name, address, telephone No., telex No.
and fax No. of the applicant. In case the applicant already has an office in
India, the particulars may also be given for that office.
2. Please indicate whether the applicant
belongs to anyone or more of the following categories:
Pension Fund,
Mutual Fund, Investment Trust, Asset Management Company, Bank, Nominee Company
and Incorporated/Institutional Portfolio Manager or their power of Attorney
holder (providing discretionary and non‑discretionary portfolio
management services.
3.
(a) The date and place of incorporation of the applicant.
(b) Brief description of the principal
activities of the applicant and the year of commencement of such activities.
(c) Brief description of the group, if any, to which the
applicant belongs.
4. Name, address, telephone, telex and fax
number of the Securities Commission/Self Regulatory Organisation/the relevant
statutory authority for the securities market or any other appropriate
regulatory authority with whom the applicant is registered or by whom the
applicant is regulated in the country where the applicant is incorporated or in
the countries of its operations, and the registration number and period of
registration.
Please also
state whether there has been any instance of violation or non‑adherence
to the securities laws, code of ethics/conduct, code of business rules, for
which the applicant, or its parent/holding company or affiliate may have been
subjected to economic, or criminal liability or suspended from carrying out its
operations, or the registration has been revoked, temporarily or permanently.
5.
(a) Please indicate the names of the clients
on whose behalf you propose to invest in India.
(b) Please provide additional information
and undertakings, in respect of each client for which sub‑account
registration is being sought, as specified in Annexure‑B to this Form.
6. Please indicate the manner in which you
propose to conduct your investments in India, i.e., whether through an
establishment in India or through any other office outside India. Please give
details, and also the name of the contact person/ compliance officer.
7. Name and address of the designated bank
branch in India through whom investment is proposed to be made.
8.
(a) Name, address, telephone No., telex No.
and fax No. of the domestic custodian. Please also present the background
information on the custodian, including volume of business handled,
organizational infrastructure and the number of investment companies for which
the domestic custodian is acting, or has acted, as custodian.
(b) Particulars of the agreement entered into with the domestic
custodian.
Documents to be enclosed with the application:
(a) Copies of Memorandum and Articles of
Association and Investment Management Agreements or any other agreements
authorising the applicant to invest on behalf of its clients.
(b) Audited financial statements and annual reports for the last
5 years.
(c) Documents to support registration or
regulation by a Securities Commission and/or Self regulatory Organisation, or
any other appropriate regulatory authority.
(d) Copy of the Custodian Agreement with the domestic custodian.'
(e) Declaration Statement (to be given as below).
We hereby agree
and declare that the information supplied in the application, including the
attachment sheets, is complete and true.
And we further
agree that we will immediately notify the Securities and Exchange Board of
India and the Reserve Bank of India of any change in the information provided
in the application.
We further agree
that we shall comply with the provisions of the Act, and regulations issued
thereunder and all other relevant laws including guidelines issued by the
Reserve Bank of India and the Government of India.
We further agree
that as a condition of grant of certificate of registration we shall abide by
such operational instructions/directives as may be issued by Securities and
Exchange Board of India under the provisions of the Act and by the Reserve Bank
of India from time to time.
For and on behalf of
______________________________________________________
(Name of the applicant)
Authorised Signatory
______________________________________________________
(Name) (Signature)
Date: _________
Place: _________
Note.‑
1. Securities and Exchange Board of India
(SEBI) and Reserve Bank of India (RBI) reserve the right to call for any
further information from the applicant regarding his application.
2. Applications, super scribed‑
"Application for Registration of Foreign Institutional Investor", should
be submitted in duplicate, in sealed envelopes, at Securities and Exchange
Board of India's office.
Additional details to be
provided by applicants under clause (iv) of sub‑regulation (d) of
regulation 6 of the Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995:
(1) Please indicate whether the applicant
belongs to any one or more of the following categories: University funds,
endowments, foundations or charitable trusts or charitable societies.
(2) Please provide details of the sponsors
or organizers of the applicant, the objectives of the applicant, the nature of
activities carried on by the applicant and state whether it has invested in securities markets outside the
country in which it has been incorporated or established.
(3) Please state whether the applicant is
registered with any statutory authority in the country of its incorporation or
establishment.
(4) Please describe the manner in which the funds of the
applicant are being managed.
(5) Please enclose a copy of the applicant's
charter or other documents of incorporation or establishment
[See regulations 12(3),
13(1)(e) and para 5(b) of Form‑A]
Additional information and undertakings to be provided in respect of
each client for which sub‑account registration is sought, in terms of sub‑regulation
(1) of regulation 13 of the Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995:
1. Sub‑account to provide the following details:
(i) Name of the Client/sub‑account
(ii) Date and place of incorporation or establishment of the
client/sub‑account
(iii) Constitution of the client/sub‑account
(i.e., Partnership Firm, Private Company, Public Company, Pension Fund, Mutual
Fund, Investment Trust etc.)
(iv) Name of domestic custodian and designated
bank to be used by the client/ sub‑account.
Authorised Signatory of sub‑account/client:
__________________ ____________________
(Name of sub‑account) (Signature)
Fowarded by FII:
__________________ ____________________
(Name by FII) (Signature)
2. Please provide the following
undertakings by the FII in respect of the client/ sub‑account:
A. "We
hereby undertake that the _______________ (give name of client/sub
account) is:
(i) an institution or fund or portfolio
established or incorporated outside India and proposes to make investment in
India;
(ii) a broad based fund in terms of
regulation ________ [or proprietary fund of the Foreign Institutional Investor
mentioned in (i) above] (mention whichever is applicable);
(iii) the Foreign Institutional Investor (give
name and SEBI registration number) through whom the application for
registration is made to the Board holds a certificate of registration as
Foreign Institutional Investor; and
(iv) the Foreign Institutional Investor
through whom an application for registration of sub‑account is made, is
authorised to invest on behalf of the sub‑account".
B. "We also undertake in respect of
our client/sub‑account _______________
(give name of the client/sub‑account)
that:
(a) the client/sub‑account or its
directors have not been convicted by a Court for any offence involving moral
turpitude or fraud and sentenced in respect thereof to imprisonment for a
period greater than six months;
(b) no winding up orders have been passed
against the client/sub‑ account;
(c) no order suspending or debarring the
client/sub‑account from permanently carrying on activities in the
financial sector has been passed by any regulatory authority;
(d) no
order withdrawing or refusing to grant any license/approval to the client/sub
account which has a bearing on the securities market has been passed by any
authority in the preceding five years;
(e) any penalty imposed (including monetary
penalty) by a regulatory authority has been carried out".
C. "In case the client/sub‑account
is a broad based fund, please provide the following further undertaking:
"We
undertake that the proprietary funds of ______________________ (give name of
the Foreign Institutional Investor) shall not be invested through the
client/sub-account".
OR
In case the
client/sub‑account is a proprietary fund of the Foreign Institutional
Investor, please provide the following further undertaking:
"We
undertake that only the proprietary funds of the __________________ (give name
of the Foreign Institutional Investor) shall be invested through the client/sub‑account".
We hereby agree
and declare that the information provided and the undertakings given above are
complete and true.
And we further
agree that we will immediately notify the Securities and Exchange Board of
India and the Reserve Bank of India of any change in the information provided.
Authorised signatory of FII:
_______________________ _______________________
(Name by FII) (Signature)
3. Additional information and undertakings
to be provided by sub‑account who are foreign corporates or individuals,
(A) The following details may be provided in respect of sub‑account
(i) Date and place of birth/incorporation
of the individual/corporate entity;
(ii) Citizenship of the individual;
(iii) Present address of the
individual/registered address of corporate entity along with telephone no., fax
no., e‑mail address, etc.;
(iv) Name and address of the taxation
authorities with whom tax returns are being filed;
(v) The permanent account No. or
registration No. or ID No. with taxation authorities;
(vi) Name of the global custodian, custodian
in India and designated bank in India;
(B) The foreign institutional investor shall submit the following
undertaking
We undertake
that-
(i) the applicant is subjected to outside
taxation authorities and is regularly filing the tax returns;
(ii) the income of the applicant is from
known and legitimate sources;
(iii) the applicant is not a non‑resident
Indian or an overseas body corporate registered with the Reserve Bank of India.
We hereby agree
and declare that the information provided and the undertakings given above are
compete and true.
And we further
agree that we will immediately notify the Securities and Exchange Board of
India and the Reserve Bank of India of any change in the information provided.
Authorised signatory of FII
: ________________________
(Name of FII)
________________________
(Signature)
(Regulation 1)
Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995 Certificate of Registration
I. In exercise of the powers conferred by
sub‑section (1A) of section 12 of the Securities and Exchange Board of
India Act, 1992, read with the regulations made there under the Board hereby
grants a certificate of registration to ____________ as a Foreign Institutional
Investor, subject to the conditions specified in the Act and in the regulations
made there under:
II. Registration Number for the Foreign
Institutional Investor is In ________________
III. Unless renewed, the certificate of registration is valid from
_________ to _______
Date: By Order
Place: Bombay for and on behalf of Securities and
Exchange Board of India
Authorised Signatory
(Regulation 7)
(Foreign Institutional Investors) Regulations, 1995
(1) Every applicant eligible for grant of a
certificate under regulation 7 shall pay a registration fee of US $ 10,000.
(2) The registration fee shall be payable at
the time of initial registration as well as at the time of each renewal, within
15 days from the date of intimation from the Board.
(2A) An application for registration of sub‑account
under regulation 12 shall be accompanied by a registration fee of US $ 1,000,
which shall be payable at the time of initial application for registration as
well as at the time of each renewal, and fees paid in respect of renewal shall
be paid within 15 days of intimation by the Board.
(3) The registration fee specified above
shall be payable by the applicant by a draft in favour of "Securities and
Exchange Board of India" or by any other appropriate mode or instrument as
may be specified by the Board.
RELEVANT CIRCULARS
(1)
PRESS NOTE TO AMENDMENT TO THE SEBI (FOREIGN INSTITUTIONAL INVESTORS)
REGULATIONS, 1995
[Ref. No. PR 73/96 dated July 24,1996 issued by IIMARP Department]
1. While presenting the Budget for 1996‑97
the Finance Minister had announced certain changes in the present Government
policy on investment by Foreign Institutional Investors in Indian Securities
markets. To give effect to these changes, the SEBI Board today approved
amendments to the SEBI (Foreign Institutional Investors), Regulations 1995. The
amendments are as follows:
- The limit on investment by FIIs or
sub‑accounts of FIIs in the total issued capital of individual companies
has been raised from the existing 5 per cent to 10 per cent. No change has been
made to the overall limit of 24 per cent on investments by all FIIs/NRIs and
OCBs in companies.
‑ FIIs have been allowed to invest in
unlisted companies to attract FII investment in the infrastructure sector.
2. Further, with a view to broaden the FII
base and augment the availability of funds, funds such as university funds,
endowments, foundations, charitable trusts/societies with a track record,
several of which have expressed interest in investment in Indian securities
markets would also be eligible for investment as FIIs.
3. The amendments will take effect upon
their notification in the Official Gazette, which would be done shortly.
Secondary Market
4. The Board also reviewed the status of the secondary market.
(2)
INVESTMENT BY FOREIGN INSTITUTIONAL INVESTORS IN DEBT SECURITIES
[Press Release ref. No. PR 112/96 issued by Securities and Exchange
Board of India,
dated 9th November, 1996]
Following the announcement
made by the Finance Minister to ease the restrictions on investment by FIIs in
debt securities, the SEBI has approved the necessary changes to the SEBI
(Foreign Institutional Investors) Regulations, 1995. The main features of the
changes are as follows:
(i) Any FII or sub‑account already
registered with SEBI or to be registered would continue to be governed by ceiling
of 30% on debt instruments.
(ii) In addition, any registered FII willing
to make 100% investment in debt securities will be permitted to do so, subject
to specific approval from SEBI as a separate category of FIIs or sub‑accounts
as 100% debt funds. In such cases, the restriction of 30% debt will not be
applicable.
(iii) FII investment in debt through the 100%
debt route will be subject to an overall debt cap of US $ 1.0‑1.5 billion
for investment by all FIIs mentioned in (ii) above.
(iv) SEBI will impose individual ceiling on
individual funds or sub‑accounts. This ceiling will be based on the track
record of the FII and its experience in managing debt funds in emerging markets
and other objective criteria. Individual debt funds would be informed of the
respective ceiling at the time of the registration/approval.
(v) Investments by FIIs through the 100%
debt route would be permitted only in debt securities of companies which are
listed or to be listed.
(vi) Investment by FIIs in debt securities
through the 100% route would be permitted without any restriction on maturity
of the debt securities invested in.
(vii) Investment by FIIs in debt securities
through the 100% route would be without any limit on investment in the debt
securities of any particular issuer.
The SEBI Board had earlier
approved changes to the FII regulations permitting investment by individual
FIIs to sub‑accounts of FIIs in upto 10% of the equity capital of
investee companies permitting investment in unlisted securities and including
endowment funds in the eligible categories of FIIs. These changes have already
come into effect on 9th October, 1996, with their notification in
the official gazette.
(3)
INVESTMENT BY FOREIGN INSTITUTIONAL INVESTORS (FIIs) IN GOVERNMENT
DATED SECURITIES AND TREASURY BILLS
Following the policy
decisions taken by RBI/SEBI and amendments to SEBI (FIIs) Regulations, 1995,
the RBI guidelines issued on March 8, 1997 specifying the manner of
transactions by Foreign Institutional Investors stand amended to enable all
FlIs to invest in Government dated securities and treasury bills. These
amendments enable equity funds to invest in the above within their debt ceiling
of 30 per cent and the debt funds to the full extent.
2. The amendments are to the following effect:
(a) For the purpose of FII investment,
Government securities would include dated securities of both Government of
India and State Governments of all maturities and treasury bills of Government
of India.
(b) Investment in Government dated securities
dated and treasury bills by FIIs may be made either in the primary market at
the auction/floatation or in the secondary market.
3. As regards procedures, the guidelines
given in respect of investment by FII debt funds in Government securities would
be applicable.
4. It may be recalled that in pursuance of
the monetary and credit policy for the first half of 1998‑99 the
Securities and Exchange Board of India (SEBI) has issued Notification No. S.O.
417(E), dated 18 May, 1998, amending the Securities and Exchange Board of India
(Foreign Institutional Investors) Regulations, 1995, in terms of which Foreign
Institutional Investors are now permitted to invest in treasury bills.
5. It may also be recalled that in
pursuance of the monetary and credit policy for the second half of 1997‑98,
Securities and Exchange Board of India (SEBI) had issued Notification No. S.O.
333(E), dated 20 April, 1998, amending the Securities and Exchange Board of
India (Foreign Institutional Investors) Regulations, 1995, in terms of which
Foreign Institutional Investors with a ceiling of 30 per cent investment in
debt instruments are permitted to invest in Government dated securities within
the ceiling of 30 per cent, besides 100 per cent debt funds.
[Press Release Reference No. 1997‑98/1198,
issued by Securities and Exchange Board of India, dated 11th June,
1998]
(4)
REVISED PROCEDURE FOR GRANT OF REGISTRATION OF SUB‑ACCOUNTS OF
REGISTERED FOREIGN INSTITUTIONAL INVESTORS
With a view to expedite the
grant of registration to sub‑accounts, the process of registration has
been simplified. Henceforth, registered Foreign Institutional Investors would
be required to submit only the details of the sub‑account along with an
undertaking and a registration fee of US$ 1000. No other document or enclosures
would be necessary. The SEBI (Foreign Institutional Investors) Regulations,
1995 have been amended on June 30, 1998 so as to incorporate the revised
procedure (refer regulation 12(3)]. The format for submitting sub‑account
details and undertaking is available as Annexure‑B to Form‑A of
SEBI (Foreign Institutional Investors) Regulations, 1995.
The details of the revised
procedure are mentioned below:
1. Documents
to be submitted.‑ The registered FII would submit the details and undertaking in respect
of each sub‑account for which it seeks registration in the format given as Annexure‑13 to Form‑A of
SEBI (Foreign Institutional Investors) Regulations, 1995. This format is also
available at the SEBI website: www.sebi. gov.in.
2. Registration
Fee.‑ Each
sub‑account application would be accompanied by a registration fee of US$
1000 by means of a bank draft/bankers cheque favoring "Securities and
Exchange Board of India", payable at Mumbai. A separate bankers
cheque/draft may be submitted in respect of each sub‑account application.
3. Validity
of Registration.‑ The sub‑account registration would have the same validity as that
of the FII under which it is registered. In other words, at the time of renewal
of registration of a FII, all the underlying sub‑accounts would also be
required to seek renewal of registration, irrespective of the date of initial
registration of the sub‑account. For grant of renewal, the sub‑account
details and undertaking as mentioned in Annexure‑B of SEBI (FII)
Regulations, 1995 would have to be submitted, along with renewal fee of US$
1,000.
4. Grant
of Registration.‑ It is proposed that in respect of all complete application for grant of
registration to sub‑accounts, the registration would be granted within 3
working days of receipt of application at SEBI. Applications which are
incomplete, ineligible or not accompanied by the requisite fee would be
returned to the applicants.
5. Verification
of Application.‑ With a view to expedite the grant of registration to sub accounts, it
is proposed that the Foreign Institutional Investors would conduct the due
diligence exercise at their end to verify the eligibility of the sub‑accounts.
SEBI would grant registration merely on the basis of the undertaking given by
the FII. In case any details are subsequently found to be incorrect, the FII
would become liable for appropriate action by SEBI.
General.‑ The SEBI (Foreign Institutional Investors) Regulations, 1995 have been
amended from time to time so as to increase the scope of investments by FIIs
and to simplify the registration procedure. The latest copy of the Regulations
is available at SEBI website: www.sebi.gov.in.
[Issued by FIITC Department
of SEBI vide PR 237/98, dated 27‑8‑1998]
1. Sub‑account to provide
the following details:
(i) Name of the client/sub‑account.
(ii) Date and place of incorporation or establishment of the
client/sub‑account.
(iii) Constitution of the client/sub‑account
(i.e., Partnership Firm, Private Company, Public Company, Pension Fund, Mutual
Fund, Investment Trust etc.).
(iv) Name of domestic custodian and designated
bank to be used by the client/ sub‑account.
SEBI (Foreign Institutional
Investors) Regulations, 1995 § App.
73(4)2225
Authorised Signatory of sub‑account/client
: ____________________________________
(Name of sub‑account)
(Signature)
Forwarded by FII : _____________________________________________________
(Signature) (Name
of FII)
2. Please provide the following undertakings
by the FII in respect of the client/sub‑ account:
A. "We hereby undertake that the
__________________________ (give name of client/sub‑account) is
(i) an institution or fund or portfolio
established or incorporated outside India and proposes to make investment in
India;
(ii) a broad based fund in terms of
regulation or proprietary fund of the Foreign Institutional Investor mentioned
in (i) above (mention whichever is applicable);
(iii) the Foreign Institutional Investor (give
name and SEBI registration number) through whom the application for
registration is made to the Board holds a certificate of registration as
Foreign Institutional Investor; and
(iv) the Foreign Institutional Investor
through whom an application for registration of sub account is made, is
authorised to invest on behalf of the sub‑account".
B. "We also undertake in respect of
our client/sub‑account, _______ (give name of the client/sub‑account)
that:
(a) the client/sub‑account or its
directors have not been convicted by a Court for any offence involving moral
turpitude or fraud and sentenced in respect thereof to imprisonment for a
period greater than six months;
(b) no winding up orders have been passed
against the client/sub‑ account;
(c) no order suspending or debarring the
client/sub‑account from permanently carrying on activities in the
financial sector has been passed by any regulatory authority;
(d) no order withdrawing or refusing to
grant any license/approval to the client/sub‑account which has a bearing
on the securities market has been passed by any authority in the preceding five
years;
(e) any penalty imposed (including monetary
penalty) by any regulatory authority has been carried out.
C. "In case the client/sub‑account
is a broad based fund, please provide the following further undertaking:
"We
undertake that the proprietary funds of ______________________ (give name of
the Foreign Institutional Investors) shall not be invested through the
client/sub‑account".
OR
In case the
client/sub‑account is a proprietary fund of the Foreign Institutional
Investor, please provide the following further undertaking:
"We
undertake that only the proprietary funds the ____________ (give name of the
Foreign Institutional Investor) shall be invested through the client/sub‑
account".
We hereby agree
and declare that the information provided and the undertakings given above are
complete and true.
And we further
agree that we will immediately notify the Securities and Exchange Board of
India and the Reserve Bank of India of any change in the information provided.
Authorised signatory of FII: _________________________________________
(Signature) (Name
of FII)
Note : The
application may be submitted by registered Foreign Institutional Investors
along with registration fee of US$ 1000 by means of a bankers cheque/demand
draft in favour of Securities and
Exchange Board of India' and payable at Mumbai.