FII – It is an investor or investment
fund house that is formed or registered in a country outside of the one
in which it is currently making investments. Institutional
investors include pension funds, hedge funds, insurance companies and
mutual funds – asset management companies (AMCs) registered outside
India generally form an FII with SEBI to be allowed to invest in India.
Again, the term is used most commonly in India to refer to outside
companies investing in the financial markets of India. International
institutional investors must register with the Securities and Exchange
Board of India to participate in the market. One of the major market
regulations pertaining to FIIs involves placing limits on FII ownership
in Indian companies.
FII means an entity established or incorporated outside India which proposes to make investment in India.
You can register as a FII by applying to
SEBI in a specified format. There is no net worth requirement for the
registration of FII. Just form an investment company outside India and
apply to SEBI for the registration of the same. The following is the
procedure:
Eligibility or Requirements for making an FII:
Ø The institutions can be in the form of following only
- =>Pension Funds
- =>Mutual Funds
- =>Investment Trust
- =>Insurance or reinsurance companies
- =>Endowment Funds
- =>University Funds
- =>Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf,
And if wants to register as a broad base funds then it can be in the form of
- =>Asset Management Companies
- =>Nominee Companies
- =>Institutional Portfolio Managers
- =>Trustees
- =>Power of Attorney Holders
- =>Bank
- Ø Applicant should have track record, professional competence, financial soundness, experience, general reputation of fairness and integrity.
- Ø 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.
- Ø The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.
- Ø Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment.
- Ø The applicant must be a “fit and proper” person.
- Ø 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.
FII Sub-Account
Sub-account includes those foreign
corporates, 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.
Foreign Companies and foreign Individuals can get registered as a Sub-account.
Non Resident Individuals and Overseas Corporate Bodies cannot get themselves registered as Sub-Account.
Investments on behalf of sub-account shall not exceed 10% of total issued capital of Indian company.
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 Demand draft drawn in favour
of “Securities and Exchange Board of India” payable at a bank in New
York.
It takes generally 10-12 working days in granting FII registration.
FII registration is valid for 5 years and needs to be renewed upon payment of fee of US $5000.
Ozg Registration, Approval & Licensing Group
Foreign Institutional Investor can make Investments in following:
Ø Securities in primary and secondary
markets including shares, debentures and warrants of companies,
unlisted, listed or to be listed on a recognized stock exchange in
India.
- Ø Units of mutual funds.
- Ø Dated Government Securities.
- Ø Derivatives traded on a recognized stock exchange.
- Ø Commercial papers.
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.
- Designated Bank means any bank in India which has been authorized by the Reserve Bank of India to act as a banker to FII.
- Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.
Procedure of Registration as FII
- Ø Application for registration as an FII should 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.
- Ø The registration procedure operates as a single window procedure through SEBI in which the following steps are involved.
- Ø SEBI forwards one set to Reserve Bank of India.
- Ø The application is processed by SEBI to determine its eligibility for grant of registration as foreign institutional investor.
- Ø 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 favor of “Securities and Exchange Board of India” payable at New York.
- Ø 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.
- Ø 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.
Ozg Registration, Approval & Licensing Group
Documents required to be submitted to SEBI:
- Ø Application in Form A duly signed by the authorized signatory of the applicant.
- Ø 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
- Ø Audited financial statements and annual reports for the last one year, provided that the period covered shall not be less than twelve months.
- Ø 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 Organization or any other appropriate regulatory authority with whom the applicant is registered in its home country.
- Ø A declaration by the applicant that it has entered into a custodian agreement with a domestic custodian together with particulates of the domestic custodian.
- Ø A signed declaration statement that appears at the end of the Form.
- Ø Declaration regarding fit & proper entity
Broad Based Fund
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.
Contact for The registration of Foreign Institutional Investors
FII cases are handled by Division of
Foreign Institutional Investors and Custodians which comes under
Investment Management Department of SEBI.
