Circular No. FITTC/CUST/ 4 /1999To
February 12, 1999
All Custodians of Securities
Sub: Clarifications regarding investment by Foreign Institutional Investors.
As per the SEBI (Foreign Institutional Investors) Regulations, 1995 Amendment dated May 18, 1998, the Foreign Institutional Investors (FIIs) are permitted to invest in Treasury Bills. This avenue of investment is available to FIIs investing through 100% debt route as well as to FIIs investing through the equity route where upto 30 % investments can be made in debt instruments.
In terms of the SEBI ( Buy Back of Securities) Regulations, 1998, which have been notified on November 14, 1998, corporates have been permitted to buy back upto 25% of their paid up share capital. We have received queries from various FIIs regarding the action to be taken if the FIIs do not/ partially participate in the buy-back and thereby exceed the investment limits as a percentage of the reduced capital /post buy-back capital of the company. It is clarified that in such situations, the limit would be frozen and further FII investment would not be permitted. The pre buy-back FII investments would not be forced to be disinvested. Fresh FII investments would be permitted only when the FII investment levels fall below the limits applicable with respect to the reduced capital.
Certain instances of squaring off of transactions during the no-delivery period of a security have been bought to our notice. It is clarified that clause 3 (a) of Regulation 15 of SEBI (FII) Regulations, 1995, which stipulates conditions of compulsory delivery and no short selling in respect of FII transactions, is also applicable during the no-delivery period of a security.
The Custodians are requested to bring the contents of this circular
to the notice of their FII clients.
O P GAHROTRA