Securities And Exchange Board Of India (Foreign Institutional Investors) Regulations, 1995

Published vide Notification Gazette of India, Extraordinary, Part 2, Section 3(ii), dated 14.11.1995

1532

S.O. 918(E), dated 14th November, 1995.- 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:-

CHAPTER I

Preliminary

Short title and commencement.-(1) These regulations may be called the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.

(2) They shall come into force on the date of their publication in the Official Gazette.

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) [* * * *]

(d) "domestic custodian" includes any person carrying on the activity of providing custodial services in respect of securities;

(dd) [* * * *]

(e) Omitted by the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 w.e.f. 27.09.2002.

(f) "Foreign Institutional Investor" means an institution established or incorporated outside India which proposes to make investment in India in securities; [* * *]

(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 juridical person;

(j) "schedule" means a schedule to these regulations;

(k) [“sub-account” means any person resident outside India, on whose behalf investments are proposed to be made in India by a foreign institutional investor and who is registered as a sub-account under these regulations.]

CHAPTER II

Registration Of Foreign Institutional Investor

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 subregulation (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 these regulations.

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.

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.

Consideration of application.-[(1)]For the purpose of the grant of certificate the Board shall take into account all matters 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:

[Provided that in case of a newly established fund, the track record of the investment manager of the fund who has promoted it may be taken into consideration:

Provided further that such investment manager shall furnish the details in respect of disciplinary action, if any, taken against it.]

(b) whether the applicant is regulated by an appropriate foreign regulatory authority:

[Provided that university funds, endowments, foundations, charitable trusts and charitable societies may be considered for registration even though they are not regulated by a 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 a pension fund, mutual fund, investment trust, insurance company or reinsurance company;]

[(ia) an International or Multilateral Organisation or an agency thereof or a Foreign Governmental Agency, [Sovereign Wealth Fund] or a Foreign Central Bank;]

[(ii) an asset management company, investment manager or advisor [* * *] bank or institutional portfolio manager, established or incorporated outside India and proposing to make investments in India on behalf of broad based funds and its proprietary funds, if any;]

[(iii) a trustee of a trust established outside India and proposing to make investments in India on behalf of broad based funds and its proprietary funds, if any;]

[(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 take 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 applicant has been serving public interest].

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 forty-nine 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 fund to have [twenty investors]:

Provided further that if the broad based fund has an institutional investor who holds more than [forty nine per cent] of the shares or units in the fund, then the institutional investor must itself be a broad based fund; [* * *]

(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;

(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.]

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.

[7A. A foreign institutional investor holding a certificate shall, at all times, abide by the Code of Conduct as specified in Third 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.”]

[Validity of certificate.-(1) Subject to the compliance of the provisions of the Act, these regulations, the circulars issued thereunder and the obligation to pay fees as specified in these regulations,-

(a) any registration granted by the Board shall be permanent unless suspended or cancelled by the Board;

(b) any registration already granted by the Board prior to the commencement of the Securities and Exchange Board of India (Foreign Intuitional Investors) (Amendment) Regulations, 2008 shall be deemed to be permanent, unless suspended or cancelled by the Board.

(2) A foreign institutional investor or a sub-account, having a certificate referred to in clause (b) of sub-regulation (1) shall file information in Form A or Form AA, as the case may be, at least three months prior to the expiry of period of certificate or within three months from such commencement, whichever is later.

(3) A foreign institutional investor or a sub account may surrender the certificate of registration granted to it by the Board.

(4) While accepting a surrender of registration, the Board may impose such conditions upon the foreign institutional investor or the sub account as it deems fit.]

[9.] [* * * *]

Conditions for grant [* * *]of certificate to Foreign Institutional Investors.-The grant [* * *] of certificate to the 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 subaccount, if any, he shall obtain registration of such sub-account, under these regulations.

Procedure where certificate is not granted.-(1) Where an application for grant [* * *]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 subregulation (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.

Application for registration of sub-accounts.-(1) A Foreign Institutional Investor shall seek from the Board registration of each sub-account on whose behalf he proposes to make investments in India:

[Provided that before making an application for registration on behalf of a proposed sub-account being a foreign corporate, the foreign institutional investor shall verify the necessary details and documents and satisfy itself about the identity of the proposed sub-account after applying its know your client procedure.]

(2) Notwithstanding any thing 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 sub-account shall be made in Form AA.]

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 falls into any of the following categories, namely:-

(i) broad based fund or portfolio which is broad based, incorporated or established outside India; or

(ii) proprietary fund of a registered foreign institutional investor; or

(iii) foreign corporate; or

(iv) foreign individual; or

(v) university fund, endowment, foundation, charitable trust or charitable society who are eligible to be registered as a foreign institutional investor under these regulations.

Explanation I:- For the purposes of clause (a),

(A) “foreign corporate” means a body corporate incorporated outside India which fulfills the following conditions:-

(i) its securities are listed on a stock exchange outside India;

(ii) it has asset base of not less than two billion US dollars;

(iii) it had an average net profit of not less than fifty million US dollars during the three financial years preceding the date of the application.

(B) “foreign individual” means a foreigner who fulfills the following conditions:-

(i) has a networth of not less than fifty million US dollars;

(ii) holds the passport of a foreign country for a period of at least five years preceding the date of application;

(iii) holds a certificate of good standing from a bank;

(iv) is the client of the foreign institutional investor or any other entity which belongs to the same group as the foreign institutional investor, for a period of at least three years preceding the date of the application: Explanation II:- Non-resident Indian shall not be eligible to apply as sub-account:

Provided that nothing contained in the Explanation I to clause (a) shall apply to a sub-account which was granted registration prior to commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008.]

[(b) 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;

(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 applicant and the Foreign Institutional through whom the application for registration of sub-account is made, have submitted joint undertakings as required by Form AA 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 subregulation (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 115 AD of Income Tax Act,1961, (43 of 1961).

13A. [Responsibility of foreign institutional investors.- (1) A foreign institutional investor shall be responsible and liable for all acts of commission and omission of all its sub-accounts and other deeds and things done by such sub-accounts in their capacity as sub-accounts under these regulations.

(2) Nothing contained in sub-regulation (1) shall be deemed to detract from any responsibility or liability of the sub-account under these regulations or under any other law for the time being in force.

(3) Sub-regulation (1) shall have effect irrespective of whether the foreign institutional investor exercises discretion in respect of funds of the subaccount or not.]

CHAPTER III

Investment Conditions And Restrictions

Commencement of investment.-A Foreign Institutional Investor shall not make any investments in securities in India without complying with the provisions of this Chapter.
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 or] listed or to be listed on a recognised stock exchange in India; and

[(b) units of schemes floated by a Collective Investment Scheme.]

[(c) dated Government Securities;]

[(d) derivatives traded on a recognised stock exchange;

(e) commercial paper;]

[(f) security receipts;]

[(1A) Where a foreign institutional investor or sub-account holds equity shares in a company whose shares are not listed on any recognised stock exchange, and continues to hold such shares after initial public offering and listing thereof, such shares shall be subject to lock-in for the same period, if any, as is applicable to shares held by a foreign direct investor placed in similar position, under the policy of the Central Government relating to foreign direct investment for the time being in force.

(1B) Nothing contained in sub-regulation (1A) shall be deemed to prejudice the applicability of any other law, regulation or guideline.]

(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 tradable 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.

[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].

Provided further that the conditions mentioned in sub-regulation (2) shall not apply to investiments made by foreign institutional investors in security receipts issued by securitisation companies or asset reconstruction companies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules made thereunder:

Provided further that no foreign institutional investor shall invest in security receipts on behalf of its sub-account."

[Provided further that a corporate or individual shall not be eligible to invest through the hundred per cent, debt route.]

(3) In respect of investments in the secondary market, the following additional conditions shall apply:-

[(a) a foreign institutional investor or sub-account shall transact in the Indian securities market only on the basis of taking and giving delivery of securities purchased or sold:

Provided that nothing contained in this clause shall apply to any transactions in derivatives on a recognised stock exchange:

Provided further that a foreign institutional investor or sub-account may enter into short selling transactions only in accordance with the framework specified by the Board in this regard;]

(b) no transaction on the stock exchange shall be carried forward; and

(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 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 Acquisition of Shares and Takeovers) Regulations, 1997] [or to sale of securities by a Foreign Institutional Investor in response to an offer made by any promoter or acquirer in accordance with the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003]

[(d) a Foreign Institutional Investor or a sub-account, shall, subject to such instructions as may be issued by the Board, deliver or cause to be delivered only securities in dematerialised form for settlement of its transactions undertaken on a recognised stock exchange, except in cases where the issuer of such securities has established connectivity with all depositaries registered with the Board under Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.]

[Provided further that in case of an offer by a company to buy-back its Securities the Foreign Institutional Investor, may sell the securities held by it to such company, in accordance with Securities and Exchange Board of India (Buy-back of Securities) Regulation, 1998] [or to sale of Securities by a Foreign Institutional Investor in response to an office made by any promotor or acquirer in accordance with the Securities and Exchange of India (Delisting of Securities) Guidelines, 2003]

[Provided further that nothing contained in Clause (c) shall apply to disinvestment of securities by the Foreign Institutional Investors in response to an offer by Indian Companies in accordance with the Operative Guidelines for Disinvestment of Shares by Indian Companies in the overseas market through issue of American Depository Receipts (ADR) or Global Depository Receipts (GDR) as notified by the Government of India vide notification No. 15/23/99-NRI, dated 29.7.2002 and directions issued by Reserve Bank of India from time to time under Section 10(4) and Section 11(1) of the foreign Exchange Management Act, 1999 (42 of 1999)]

[Provided further that nothing contained in Clause (c) shall apply to any bid for, or acquistion of, securities by a Foreign Institutional Investor in response to an offer for disinvestment of shares made by the Central Government or any State Governmeny.]

[Provided further that nothing contained in Clause (c) shall apply to purchase or sale of security receipts by a foreign institutional investor.]

(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] percent 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 [ten] percent 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.]

[Provided that in case of foreign corporates or individuals, all the investments made by all foreign corporates or individuals together as sub-accounts, shall not exceed 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 or borrow securities in accordance with the framework specified by the Board in this regard.]

[Explanation- For the purposes of this regulation, the words ‘security receipts’, ‘asset reconstruction’, ‘securitisation company’ and ‘reconstruction company’ shall have the meanings respectively assigned to them under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.]

15A. [Conditions for issuance of offshore derivative instruments.- (1) No foreign institutional investor may issue, or otherwise deal in offshore derivative instruments, directly or indirectly, unless the following conditions are satisfied:

(a) such offshore derivative instruments are issued only to persons who are regulated by an appropriate foreign regulatory authority;

(b) such offshore derivative instruments are issued after compliance with ‘know your client’ norms: Provided that where at the commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008, any person other than a person regulated by an appropriate foreign regulatory authority is holding offshore derivative instruments issued by or on behalf of the foreign institutional investor, such foreign institutional investor shall ensure that they are cancelled, redeemed or closed out, before the thirty first day of March, 2009.

(2) A foreign institutional investor shall ensure that no further issue or transfer is made of any offshore derivative instruments issued by or on behalf of it to any person other than a person regulated by an appropriate foreign regulatory authority.

(3) No offshore derivative instruments shall be issued by or on behalf of a foreign institutional investor with derivatives tradable on any recognized stock exchange in India as underlying:

Provided that where any such offshore derivative instruments had been issued prior to the commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008 by or on behalf of a foreign institutional investor and are outstanding at such commencement, they shall be cancelled or redeemed or closed out before the thirty first day of March 2009:

Provided further that such offshore derivative instruments issued before the commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008 by or on behalf of a foreign institutional investor may be renewed upon their expiry after such commencement, so that the period of renewal ends before the thirty first day of March 2009.

(4) Where the total value of outstanding offshore derivative instruments issued by a foreign institutional investor or a sub-account as on the thirtieth day of September 2007 is more than forty per cent. of its assets under custody as on that date, further offshore derivative instruments may be issued only in lieu of offshore derivative instruments which are cancelled or redeemed or closed out:

Provided that the amount raised through such further issuance of offshore derivative instruments shall not exceed the amount of offshore derivative instruments cancelled or redeemed or closed out:

Provided further that additional offshore derivative instruments may be issued against the bonus shares allotted in respect of the equity shares against which offshore derivative instruments are already in existence.

(5) Where the total value of offshore derivative instruments issued against securities held by a foreign institutional investor or a sub-account as on the thirtieth day of September 2007 is less than forty per cent of its assets under custody as on that date, further issuance of offshore derivative instruments in any period of twelve months shall not exceed five per cent. of the total value of its assets under custody:

Provided that such further issuance shall not result in the total value of offshore derivative instruments exceeding forty per cent of the assets under custody.

(6) On and from the commencement of the Securities and Exchange Board of India (Foreign Institutional Investor) (Amendment) Regulations, 2008, no sub-account shall, directly or indirectly, issue offer derivative instruments:-

Provided that offshore derivative instruments issued directly or indirectly by a sub-account, before such commencement and outstanding as to such commencement shall be cancelled or redeemed or closed out before the thirty-first day of March, 2009.

(7) Where offshore derivative instruments issued by or on behalf of a sub account are outstanding as on the thirtieth day of September 2007 and steps have been taken by the subaccount to obtain registration as a foreign institutional investor as on the date of commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008, sub-regulations (4) and (5) and the provisos thereto shall apply as if the sub-account were a foreign institutional investor on the said date.

Explanation I: For the purpose of this regulation, -

(i) ‘offshore derivative instrument’ means any instrument, by whatever name called, which is issued overseas by a foreign institutional investor against securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its underlying;

`assets under custody' on a particular date, in relation to a foreign institutional investor or a sub-account, means the value of assets of the foreign institutional investor which are in custody of its custodian.

Explanation II:- For the purposes of sub-regulation (2) and the proviso thereto, the expression “person regulated by an appropriate foreign regulatory authority” means and includes the following, namely:-

(i) any person that is regulated/supervised and licensed/registered by a foreign central bank;

(ii) any person that is registered and regulated by a securities or futures regulator in any foreign country or state;

(iii) any broad based fund or portfolio incorporated or established outside India or proprietary fund of a registered foreign institutional investor or university fund, endowment, foundation, charitable trust or charitable society whose investments are managed by a person covered by clauses (i), or (ii) above.]

CHAPTER IV

General Obligations And Responsibilities

Appointment of domestic custodian.-(1) A Foreign Institutional Investor or a global custodian acting on behalf of the 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 investments 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;

(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.

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.
Maintenance of proper books of accounts, records, 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 realising 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;

(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.

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 period of five years.
Information to the Board.-Every Foreign Institutional Investor shall, as and when required by the Board or 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.

[20A. Foreign Institutional Investors shall fully disclose information concerning the terms of and parties to off-shore derivative instruments such as Participatory Notes, Equity Linked Notes or any other such instruments, by whatever names they are called, entered into by it or its sub-accounts or affiliates relating to any securities listed or proposed to be listed in any stock exchange in India, as and when and in such form as the Board may require.]

CHAPTER V

Procedure For Action In Case Of Default

Cancellation or suspension of certificate.-A Foreign Institutional Investor who-

(a) fails to comply with any condition subject to which certificate has been granted;

(b) contravenes any of the provisions of the Act, rules or regulations, shall be liable to penalty of

Suspension of certificate for a specified period, or

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.

Suspension of certificate.-A penalty of suspension of certificate of a 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;

(d) does not co-operate in any enquiry conducted by the Board.

Cancellation of certificate.-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 a criminal offence, involving moral turpitude;

(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.

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.
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 setting 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 recommend the penalty if any to be awarded along with the justification for such penalty.

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.

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 investments.

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.
Appeal.-Any Foreign Institutional Investor aggrieved by an order of the Board under the regulations may prefer an appeal to the Central Government under the provisions of the Securities and Exchange Board of India (Appeal to the Central Government) Rules, 1993.

[FIRST SCHEDULE]

FORMS

[FORM A]

Application Form for Grant of Certificate of Registration as Foreign Institutional Investor(FII)

[See regulation 3(2)]

Details of the applicant:-

1.1 Name of the applicant:-____________________

1.2 Address of the Applicant:-____________________

Address


Postal Code		Country
Telephone No.		Fax No.
Website

1.3 Date of incorporation/establishment:-__________________

1.4 Place and Country of Incorporation:-____________________

1.5 Legal form of the applicant and the law, under which it is incorporated, established or registered, of any:-__________________________

1.6 Brief description of the principal activities:-______________

1.7 Date of Commencement of such activities:-________________

1.8 Brief description of thr group, if any, to which the applicant belongs:-__________________________

1.9 Information pertaining to Compliance Officer:-

Name
Job Title
Telephone No.		Fax No.
E-mail ID

Category of the applicant :-

2.1 If the applicant is a fund:-

Pension Fund

University fund

Mutual Fund

Endowment

Investment Trust

Foundation

Bank

Charitable Trust

Charitable society

Insurance/Reinsurance Company

Foreign Central Bank

Foreign Governmental Agency

International or Multilateral organization

(Please state the corpus of the fund, Generic type and number of investor in the fund along with their respective proportionate holdings in a separate annexure in the following format)

Sl. No.	Generic Type of Investor	No. of Investors	Percentage of Holding



Total Corpus of the Fund

2.2 If the applicant is not a fund:

Asset Management Company

Institutional Portfolio Manager

Investment Manager/Advisor Trustee

Power of attorney holder

Classification of the Applicant:
Details of regulatory authority by which the applicant is regulated

4.1 Contact details:

Name


Company		Website

4.2 Registration Number/Code:-____________________

4.3 Please mention briefly the activities which the applicant is permitted to undertake under the registration/license granted by the above regulatory authority:-______________________

Details of association with the Indian securities market.

5.1 Nature of Investments to be made by the Applicant:-

On behalf of Self

On behalf of client(s)/fund(s)

Both

5.2 In case of investments being made on behalf of clients/Funds, details of the same:-

Name	Category	Country

Disciplinary History.

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, temporily or permanently.

Details of the domestic custodian and designated bank appointed.

7.1 Details of the domestic custodian.

Name_______________________

SEBI Reg. No.___________________

7.2 Details of designated bank:

Name of the Bank and Branch______________

Address____________________

Details of prior association with the Indian Securities Market

8.1 Whether the applicant was anytime registered as FII or sub-account with Securities and Exchange Board of India.

If yes, then please provide details:-

Name of the entity	Registered as	SEBI Registration No.	Period of Registration
			From	To

8.2 Whether any of your associate/s or group company/s, having office in India, have ever been registered with Securities and Exchange Board of India.

If yes, then please provide details:-

Name of the entity	Registered as	SEBI Registration No.	Period of Registration
			From	To

Declaration and Undertaking

We declare that:-

(a) no winding up orders have been passed against the applicant;

(b) no order suspending or debarring the applicant from permanently carrying on activities in the financial sector has been passed by any regulatory authority;

(c) no order withdrawing or refusing to grant any license/approval to the applicant which has a beaing on the securities market has been passed by any authority in the preceding five years;

(d) any penalty imposed (including monetary penalty) by any regulatory authority has been undergone or paid;

(e) the information supplied in the application, including the attachment sheets, is complete and true.

Undertaking:

We undertake to:

Notify the Securities and Exchange Board of India and the Reserve Bank of India of any change in the information provided in the application promptly.
Comply with the provisions of this Act, and regulations issued thereunder and all other relevant laws including guidelines issued by the Reserve Bank of India and the Government of India.
Abide by operational instructions/directives as may be issued by Securities and Exchange Board of India and by the Reserve Bank of India from time to time under provisions of the Act or any other law for the time being in force.
Be held responsible and liable for all acts of commission and omission of all its sub-accounts and other deeds and things done by such sub-accounts under these regulations, irrespective of whether discretion is exercised by us in respect of the sub-account.

For and on behalf of applicant________________

Notes:

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 this application.
Application along with necessary documents should be submitted at:

Securities and Exchange Board of India,

Division of Foreign Institutional Investors and Coustodians,

Plot No. C4-A, "G" Block,

Bandra Kurla Complex,

Mumbai-400051

Documents and Instruments to be enclosed with the application:

(i) Certified copy of the relevant clause of Articles of the Memorandum and Articles of Association of the agreement authorizing the applicant to invest on behalf of its clients.

(ii) Audited financial statements/annual report of the previous financial year (period covered shall not be less than twelve months)

(iii) Draft of US $10,000 in favour of `Securities and Exchange Board of India' payable in New York.

FORM AA

Appication Form for Grant of Certificate of Registration as Sub-account

[See Regulation 12(1)]

1.1 Name of the applicant:-____________________

1.2 Address of the Applicant:-____________________

Address


Postal Code		Country
Telephone No.		Fax No.
Website

1.3 Date of incorporation/establishment:-__________________

1.4 Place and Country of Incorporation:-____________________

1.5 Legal form of the applicant and the law, under which it is incorporated, established or registered, of any:-__________________________

1.6 Brief description of the principal activities:-______________

1.7 Date of Commencement of such activities:-________________

1.8 Brief description of thr group, if any, to which the applicant belongs:-__________________________

1.9 Information pertaining to Compliance Officer:-

Name
Job Title
Telephone No.		Fax No.
E-mail ID

Category of the applicant :-

2.1 If the applicant is a fund:-

Pension Fund

University fund

Mutual Fund

Endowment

Investment Trust

Foundation

Bank

Charitable Trust

Charitable society

Insurance/Reinsurance Company

Foreign Central Bank

Foreign Governmental Agency

International or Multilateral organization

(Please state the corpus of the fund, Generic type and number of investor in the fund along with their respective proportionate holdings in a separate annexure in the following format)

Sl. No.	Generic Type of Investor	No. of Investors	Percentage of Holding



Total Corpus of the Fund

2.2 If the applicant is not a fund:

Asset Management Company

Institutional Portfolio Manager

Investment Manager/Advisor Trustee

Power of attorney holder

Classification of the Applicant:
Details of regulatory authority by which the applicant is regulated

4.1 Contact details:

Name


Company		Website

Declaration to be furnished by the Foreign Institutional Investor.
We declare that:

(a) no winding up orders have been passed against the applicant,

(b) no order suspending or debarring the applicant from permanently carrying on activities in the financial sector has been passed by any regulatory authority;

(c) no order withdrawing or refusing to grant any license/approval to the applicant which has a bearing on the securities market has been passed by any authority in the preceding five years;

(d) any penalty imposed (including monetary penalty) by any regulatory authority has been undergone or paid;

In case of the sub-account applicant is a foreign Corporate:

(a) its securities are listed on a stock exchange outside India;

(b) it has a asset base of not less two billion US dollars;

(c) it has an average net profit of not less that fifty million US dollars during the three financial years preceding the date of the application.

In case the sub-account applicant is a Foreign Individual:

(a) has a worth of not less than fifty million US dollars;

holds the passport of a foreign country for a period of at least five years preceding the date of application;

holds a certificate of good standing from a bank

is a client of the foreign institutional investor or any other entity which belongs to the same group as the foreign institutional investor, for a period of at least three years preceding the date of the application;

Undertaking:
Undertakings to the submitted by FII

(i) In case the sub-account applicant is a broad based fund:

"We undertake that the proprietary funds of ........(name of FII) shall not be invested through ..............(name of the sub-account applicant)."

(ii) In case of the sub-account applicant is a proprietary fund of the Foreign Institutional Investor:

"We undertake that only the proprietary funds of ..........(name of FII) shall be invested through ...........(name of the sub-account applicant)."

(Please Strike off which is not applicable).

Further declaration and undertaking :
We further declare that :

the Foreign Institutional Investor through whom an application for registration of sub-account is made, is authorized to invest on behalf of the sub-account;

the income of the applicant is from known and legitimate sources; the applicant is not a non-resident Indian; the foreign institutional investor through whom the application for registration of sub-account is made shall be responsible and liable for all acts of commission and omission of this sub-account and other deeds and things done by such sub-accounts under these regulations, irrespective of whether discretion is exercised or not by the foreign institutional investor in respect of the sub-account.

the above obligation of the foreign institutional investor shall, however, not be deemed to detract from any responsibility or liablility which the sub-account shall incur under the regulations made by the Board or under any law for the time being in force in India.

We hereby agree and declare that the information provided and the undertakings given above are complete and true.
We further undertake 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.

Note:

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.
Applications along with necessary documents should be submitted at

Securities and Exchange Board of India,

Division of Foreign Institutional Investors and Custodians,

Plot no. C4-A, "G" Block,

Bandra Kurla Complex,

Mumbai-400 051

INDIA

[Annexure A

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;

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.
Please provide details of the sponsors or organisers 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.
Please state whether the applicant is registered with any statutory authority in the country of its incorporation or establishment.
Please describe the manner in which the funds of the applicant are being managed.
Please enclose a copy of the applicant's charter or other documents of incorporation or establishment.]

ANNEXURE B

[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:

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)____________________

Forwarded by FII

(Name of FII)_____________

(Signature)___________________

Please provide the following undertakings by the FII in respect of the client/sub-account:
"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 broadbased 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 registrations 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 has 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."

"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."

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 give 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 Signature of FII:_______________

(Name of FII)_____________

(Signature)___________

[3. Additional information and undertakings to be provided by sub accounts 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 I 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 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 of FII)_____________

(Signature)._______________]

FORM B

(Regulation 7)

SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN INSTITUTIONAL INVESTORS) REGULATIONS, 1995

Certificate of Registration

In exercise of the powers conferred by sub-section (1-A) of Section 12 of the Securities and Exchange Board of India Act, 1992, read with the regulations made thereunder 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 thereunder.
Registration Number for the Foreign Institutional Investor is IN/....... /....../.....
[The certificate shall be valid till it is suspended or cancelled in accordance with regulations;]

Date:________

Place: Bombay

By Order For and on behalf of Securities and Exchange Board of India

Authorised Signatory.

SECOND SCHEDULE-PAYMENT OF FEES

(Regulation 7)

SECURITIES AND EXCHANGE BOARD OF INDIA (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) A registered Foreign Institutional Investor shall pay a fee of US $10,000 for every block of three years after grant of registration during which the registration subsists.

(2-A) The fee mentioned in paragraph (2) shall be paid at least one month before expiry of the period of three years.

(2-B) In case of a foreign institutional investor who was registered as at the commencement of the Securities and Exchange Board of India (Foreign Institutional Investors) (Amendment) Regulations, 2008, the blocks of three years for the purposes of paragraph (2) shall be reckoned from the date which is three years prior to the date on which the registration or renewal granted to it prior to such commencement would have expired but for such commencement.

(2-C) An application for registration as a sub-account made under Regulation 12 shall be accompanied with a fee of US $ 2000.

(2-D) A registered sub-account shall pay a fee of US $ 2000 for every block of three years for which the foreign institutional investor through whom it makes investment in the Indian Securities Market pays fees under paragraph (2).

(2-E) A foreign institutional investor shall collect and pay the fees payable by all its sub-accounts within the period mentioned in paragraph (2-A)."]

[SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN INSTITUTIONAL INVESTORS), REGULATIONS, 1995]

Code of Conduct

(Regulation 7A)

THIRD SCHEDULE

A Foreign Institutional Investor and its key personnel shall observe high standards of integrity, fairness and professionalism in all dealing in the Indian securities market with intermediaries, regulatory and other Government Authorities.
A Foreign Institutional Investor shall, at all times, render high standards of service, exercise due diligence and independent professional judgment.
A Foreign Institutional Investor shall ensure and maintain confidentiality in respect of trades done on its own behalf and/or on behalf of its sub-accounts/clients.
A Foreign Institutional Investor shall ensure the following :
clear segregation of its own money/securities and sub-accounts' money/securities.
arms length relationship between its business of fund management/investment and its other business.
A Foreign Institutional Investor shall maintain an appropriate level of knowledge and competency and abide by the provisions of the Act, regulations made thereunder and the circulars and guidelines, which may be applicable and relevant to the activities carried on by it. Every Foreign Institutional Investor shall also comply with award of the Ombudsman and decision of the Board under Securities and Exchange Board of India (Ombudsman) Regulations, 2003.
A Foreign Institutional Investor shall not make any untrue statement or suppress any material fact in any documents, reports or information furnished to the Board.
A Foreign Institutional Investor shall ensure that good corporate policies and corporate governance are observed by it.
A Foreign Institutional Investor shall ensure that it does not engage in fraudulent and manipulative transactions in the securities listed in any stock exchange in India.
A Foreign Institutional Investor or any of its directors or manager shall not, either through its/his own account or through any associate or family members, relatives or friends indulge in any insider trading.
A Foreign Institutional Investor shall not be a party to or instrumental for-
creation of false market in securities listed or proposed to be listed in any stock exchange in India;
price rigging or manipulation of prices of securities listed or proposed to be listed in any stock exchange in India;
passing of price sensitive information to any person or intermediary in the securities market.

[(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 maybe specified by the Board.]