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Investor Information - FII FAQ

What is the procedure for registration of Foreign Institutional Investor(FII)?
What documents required to be submitted at the time of applying for registration as an FII?
Who can be registered as an FII?
What are the eligibility criteria to be fulfilled by the applicant seeking FII registration?
How much time does it take for procuring registration as a Foreign Institutional Investor?
What is the procedure for registration of sub-account?
Who can invest as sub-accounts of an FII?
What is a broad based Fund (sub account)?
What is a proprietary fund (sub account) ?
Do all sub-accounts need to be broad-based?
How many days are required to register sub-accounts?
Is it necessary for the sub-account also to be registered with the overseas regulatory body?
What is the method of payment of registration fees?
Is it necessary to submit the custody agreement with the application itself or it could be submitted before the registration procedures are completed?
In which name should the securities be registered?
What is the procedure in case the Foreign Institutional Investor/ sub account changes its name?
What is the procedure for transferring a sub-account from one registered Foreign Institutional Investor to another?
What is the procedure for change of local custodian?
What is the procedure for registration as FII/sub account under 100% debt route ?
Can a Foreign Institutional Investor having an existing account with one custodian open an account with other custodian for its sub- accounts?
What is the procedure if an existing sub-account wants to get registered as a Foreign Institutional Investor?
In case of merger or takeover, in case if the registered Foreign Institutional Investor loses its existence, then can the SEBI FII registration be transferred to the surviving entity?
What are the investment limits for FII/ sub-accounts?
Who all are included under the definition of foreign individual?
On what basis is the FII investment limit calculated?
What is the validity period of sub-account registration?
Can an FII/sub-account trade after its registration has expired?
Can protected cell companies/cells incorporated in Mauritius be registered as FIIs/sub-accounts?
Can FII/sub-accounts trade in derivatives?
What is the procedure for renewal of FII/sub-account registration?

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What is the procedure for registration of Foreign Institutional Investor(FII)?
Aplication for registration as an FII may be made in Form A. The format of Form A is provided in the SEBI(FII) Regulations, 1995 .The application form and all supporting documents must be submitted in duplicate, one set each for SEBI and Reserve Bank of India. Both sets of application are to be sent to SEBI only. If the applicant is eligible and all documents are submitted with the application, the eligibility is generally conveyed with 10 to 12 days of receipt of application by SEBI.

Application may be sent to:

The Division Chief

FII Division

Securities and Exchange Board of India,

224, Mittal Court, ‘B’ Wing, 1st Floor,

Nariman Point, Mumbai – 400 021.

INDIA.

The registration procedure operates as a single window procedure through SEBI in which the following steps are involved.

    1. SEBI forwards one set to Reserve Bank of India.
    2. The application is processed by SEBI to determine its eligibility for grant of registration as foreign institutional investor.
    3. After the initial processing is complete, SEBI writes to Reserve Bank of India mentioning the eligibility of the applicant. At the same time , a letter is sent to applicant asking it to submit the registration fees of US$ 5,000 through a demand draft drawn in favour of "Securities and Exchange Board of India" payable at New York.
    4. Reserve Bank of India gives approval to the FII through its designated bank . This approval is granted Foreign Exchange Management Act and enables the FII(s) to open a bank account. This is a special non-resident rupee account of the FII meant purely for inward remittance and meeting payment obligation with regard to securities market. It may be noted that all balance lying in this account are fully repatriable.
    5. Upon receipt of fees from the applicant and FEMA approval from Reserve Bank of India , SEBI grants the certificate of registration, which is valid for five years, and may be renewed thereafter.

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What documents required to be submitted at the time of applying for registration as an FII?
  • Application in Form A duly signed by the authorised signatory of the applicant.
  • Certified copy of the relevant clauses or articles of the Memorandum and Articles of Association or the agreement authorizing the applicant to invest on behalf of its clients
  • Audited financial statements and annual reports for the last one year , provided that the period covered shall not be less than twelve months.
  • A declaration by the applicant with registration number and other particulars in support of its registration or regulation by a Securities Commission or Self Regulatory Organisation or any other appropriate regulatory authority with whom the applicant is registered in its home country.
  • A declaration by the applicant that it has entered into a custodian agreement with a domestic custodian together with particulatrs of the domestic custodian.
  • A signed declaration statement that appears at the end of the Form.
  • Declaration regarding fit & proper entity.

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Who can be registered as an FII?
The applicant should belong to any of the following categories: 1.Pension Funds

2.Mutual Funds

3.Investment Trust

4.Insurance or reinsurance companies

5.Endowment Funds

6.University Funds

7.Foundations or Charitable Trusts or Charitable Societies   who propose to invest on their own behalf, and

1. Asset Management Companies

2. Nominee Companies

3. Institutional Portfolio Managers

4. Trustees

5. Power of Attorney Holders

6. Bank

who propose to invest their proprietary funds or on behalf of"broad based" funds or on of foreign corporates and individuals.

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What are the eligibility criteria to be fulfilled by the applicant seeking FII registration?
As per Regulation 6 of SEBI (Foreign Institutional Investors) Regulations,1995, Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration:
    1. Applicant should have track record, professional competence, financial soundness, experience, general reputation of fairness and integrity;
    2. The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor.
    3. The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.
    4. Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment.
    5. The applicant must be a "fit and proper" person.
    6. The applicant has to appoint a local custodian and enter into an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions.
    7. Payment of registration fee of US $ 5,000.00

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How much time does it take for procuring registration as a Foreign Institutional Investor?
SEBI would generally communicate the eligibility for grant of registration as Foreign Institutional Investor, within 10-12 days of receipt of complete application with relevant enclosures.
 
What is the procedure for registration of sub-account?
The FII has to apply on behalf of the proposed sub-account by submitting Annexure B of the Regulations duly filled and signed by both the FII and Sub-Account . Fees of US$ 1000 by means of a demand draft favouring " Securities and Exchange Board of India " payable at New York should be submitted along with Annexure B.
 
Who can invest as sub-accounts of an FII?
A sub-account includes those institutions, established or incorporated outside India and those funds, or portfolios, established outside India, whether incorporated or not and corporates and individuals, on whose behalf investments are proposed to be made in India by a Foreign Institutional Investor. It may however be noted that Non-resident Indians and Overseas Corporate Bodies (OCB) are not entitled to get registered as sub- account.

There are two categories of sub-accounts:

      1. Broad-based / Proprietary sub-accounts which are allowed to individually invest upto 10% of the total issued capital.
      2. Foreign Corporates and foreign individuals. Investments by each sub-account in this category should not exceed 5% of the issued capital.

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What is a broad based Fund (sub account)?
A broad based fund is a fund which has at least 20 shareholders and no single investor holds more than 10% of shares and units of the fund. In case, if any investor holds more than 10% of shares or units of the fund, then it in turn should be broad based.The proprietary funds of the FII shall not be invested through a broad-based fund.
 
What is a proprietary fund (sub account) ?
A Proprietary Fund is a fund wherein the ownership of the funds is that of the Foreign Institutional Investor.
 
Do all sub-accounts need to be broad-based?
No. Proprietary, Foreign corporates and foreign individuals need not be broad-based.
 
How many days are required to register sub-accounts?
In case of the registered Foreign Institutional Investor, it would take 3 working days from the date of receipt of complete application and fees.
 
Is it necessary for the sub-account also to be registered with the overseas regulatory body?

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What is the method of payment of registration fees?
Registration fee for a Foreign Institutional Investor is US $ 5,000 and that for a sub-account is US $ 1,000.

The fee may be paid by a bankers cheque or bank draft drawn in favour of "Securities and Exchange Board of India" payable at a bank in New York.

  
Is it necessary to submit the custody agreement with the application itself or it could be submitted before the registration procedures are completed?
It is not necessary to submit the custodian agreement. The applicant only has to declare that it has entered into a custodian agreement and should submit particulars of the domestic custodian.
 
In which name should the securities be registered?
The Foreign Institutional Investor has the choice to register the securities in the following names:                  
  1. In the name of the Foreign Institutional Investor if the FII is investing on its own behalf.
  2. In the name of the sub-account if the FII is investing on behalf of the sub-account
  3.  In the name of the Foreign Institutional Investor a/c sub-account if the FII is investing on behalf of the sub-account
 

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What is the procedure in case the Foreign Institutional Investor/ sub account changes its name?
In case if a registered Foreign Institutional Investor changes its name, then it has to inform SEBI promptly with the relevant documents supporting the name change. The relevant documents are :

A. Request for change in name by the Foreign Institutional Investor mentioning reasons for name change of the FII and/or sub account.

B. Certificate from the Registrar of Companies, and/or approval from home regulator.

C. Original Registration Certificate issued by SEBI to the Foreign Institutional Investor

SEBI will record the request of name change and issue a no-objection letter in this regard. The information regarding name change should be submitted immediately after the change has taken place in the home country and the requisite approval from the home regulator (if needed) has been taken.

 
What is the procedure for transferring a sub-account from one registered Foreign Institutional Investor to another?
In case if a registered sub-account wishes to transfer from one registered Foreign Institutional Investor to another, then the FII to whom it is proposed to be transferred has to request SEBI for the same along with 1) a declaration that it is authorised to invest on behalf of the sub-account and 2) a no-objection letter for the transfer of the sub-account from the transferor FII .
 
What is the procedure for change of local custodian?
In case of change of the local custodian of the FII / sub-account, the change should be intimated to SEBI by the FII. On receipt of no objection from the existing custodian and acceptance from the proposed custodian, the change of custodian would be approved - by SEBI.
 

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What is the procedure for registration as FII/sub account under 100% debt route ?
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. However, Government of India allocates the overall investment limit for 100% debt funds annually. The grant of investment limit for individual 100% debt funds is within this overall limit. The funds have to seek further investment limit in case the limit allotted to them is exhausted and they wish to invest further.
 
Can a Foreign Institutional Investor having an existing account with one custodian open an account with other custodian for its sub- accounts?
Yes. A Foreign Institutional Investor having an account with one custodian can open accounts with different custodians for its different sub-accounts. However, one sub-account cannot be custodied with more than one custodian.
 
What is the procedure if an existing sub-account wants to get registered as a Foreign Institutional Investor?
In case if a registered sub-account wishes to get itself registered as a Foreign Institutional Investor, then it will have to apply in Form A to SEBI for the same and has to satisfy all the eligibility criteria norms mentioned in SEBI (Foreign Institutional Investor) Regulations, 1995. It should also submit a letter from the old FII indicating its ‘No-objection’ to such registration.
 

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In case of merger or takeover, in case if the registered Foreign Institutional Investor loses its existence, then can the SEBI FII registration be transferred to the surviving entity?
No. SEBI FII Registration is not transferable. The surviving entity has to obtain fresh registration as an FII from SEBI .
 
What are the investment limits for FII/ sub-accounts?
The sub-account which is not a foreign individual/ corporate can individually invest upto 10%. The limit for each foreign corporate/ individual is 5%. These limits are within the overall limit of 24% / 49% or the sectoral caps as the case may be.
 
Who all are included under the definition of foreign individual?
Foreign individuals mean all foreign residents other than Non- Resident Indian and Overseas Corporate Bodies.
On what basis is the FII investment limit calculated?
Investment limit by all registered FIIs/sub accounts in primary or secondary markets under Portfolio Investment Scheme is subject to a ceiling of 24% of issued share capital of a company. The limit can be extended upto 49% / sectoral cap if the general body of the company approves it.
 

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What is the validity period of sub-account registration?
The registration of the sub-account is concurrent with the FII with which it is registered and the registration of the sub-account expires with the expiry of registration of the FII with which it is registered. Further, if the registration of the FII is suspended/cancelled, the registration of its sub-account is also suspended/ cancelled as the case may be.
 
Can an FII/sub-account trade after its registration has expired?
If the FII/sub-account’s registration expires , it cannot trade in the Indian securities market unless it obtains renewal from SEBI. In case, 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.
 
Can protected cell companies/cells incorporated in Mauritius be registered as FIIs/sub-accounts?
 
Can FII/sub-accounts trade in derivatives ?
Yes subject to operational guidelines as specified by SEBI/RBI/various regulatory authorities from time to time.
 
 
 

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