Circular No. FITTC/FII/02/2002
May 15, 2002
All Foreign Institutional Investors and
Custodians of Securities
Dear Sir / Madam,
Sub: Reporting of write off of securities held by Foreign Institutional Investors and Sub-Accounts.
It has been brought to our notice that some of the Foreign Institutional Investors (FIIs) have been writing off securities held by them or their Sub-Accounts (SAs) due to various reasons. It has been decided that the following procedure for writing off securities and reporting to SEBI may be adopted:
- Securities may be written off with prior approval of FII.
- Write off: Securities written off should be reported to SEBI as sale with nil value/ compensation received from broker / stock exchange / bank / company etc.
- Write back: If securities previously reported as written off are subsequently received by the custodian the same should be reported to SEBI as purchase. Prior permission of RBI is to be obtained before reporting the purchase.
- Disinvestment: In case a custodian is unable to deliver the securities or ascertain the claimant for the securities that are received subsequent to write off due to any unforeseen circumstances viz. FII/SA no longer existing/operating or expiry of SEBI registration/FEMA approval, etc., the following steps may be taken :
Custodians should note that they are acting as trustees and shall not derive any extra benefit from the disinvestment of securities other than their charges/fees. 5. Corporate benefits: In case of receipt of corporate benefits in the form of securities arising out of shares written off, the same shall be reported to SEBI in the normal manner. Similarly, corporate benefits received in the form of cash viz. dividend shall be credited to the Investors Protection Fund of the regional stock exchange not later than 7 days from the date of receipt of the same.
- sell these securities through stock exchange and proceeds thereof net of expenses shall be credited to the Investors Protection Fund of the regional stock exchange of the company not later than 7 days from the date of receipt thereof.
- the aforesaid sale transaction should be reported to SEBI as a normal sale.
- Confirmation in this regard shall be submitted to SEBI on a monthly basis by means of a letter to be submitted by 7th of the following month.
7. Reporting Procedure:
- Custodians shall ensure that their agreements with clients contain necessary provisions for write-off as well as disinvestment and appropriation of proceeds thereof as cited above.
- Write off: The write off of securities as stated at para 2 above shall be reported to SEBI as sale with nil value / compensation received from broker/exchange/bank/company under transaction code 17.
- Write back: The write back shall be reported to SEBI as purchase in the account of the respective FII/SA under transaction code 18.
- Disinvestment: Disinvestment as stated in para 4 above shall be reported as normal sale under transaction code 4.
Further, securities already written off by the FIIs/SAs should be reported vide a single report both in hard and soft copy by June 01, 2002.
These instructions are issued under regulation 20 of SEBI (Foreign Institutional Investors) Regulations, 1995 and shall come in force with effect from June 01, 2002.
A copy of the circular is available at the web page "Foreign Institutional Investors" on our website www.sebi.gov.in . The custodians are requested to bring the contents of this circular to the notice of their FII clients.
FAX NO: 91 22 2845776