Mar 12
6
In this article we would talk about how can foreign companies NOT registered in India or you may say registered outside India from a FII in India, FII registration requirements. So what is an 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.
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Who can get Register as an FII – foreign institutional investor in India?
Ø Pension Funds.
Ø Mutual funds.
Ø Insurance or Reinsurance Companies.
Ø Charitable Trusts/ Charitable Societies.
Ø Endowment Funds.
Ø University Funds.
Ø Investment Trust
Ø Asset Management Companies.
Ø Nominee Companies.
Ø Institutional Portfolio Managers.
Ø Banks.
Ø Trustees.
Ø Power of Attorney Holders.
Eligibility or Requirements for making an FII:
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.
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.
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.
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