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Press Release
June 23, 1998
Ref.No.PR 159/98 

The SEBI Board at its meeting in Mumbai today approved amendments to the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. These amendments are as follows:

Investment by 100% debt funds in unlisted securities

1.  The Finance Minister in his Budget Speech for 1998-99 announced that Foreign Institutional Investors (FIIs) investing through the 100% debt route would be permitted to invest in unlisted securities. The SEBI Board approved changes to the regulations to permit this.

 Participation by Foreign Institutional Investors in open offers

2. The SEBI (Foreign Institutional Investors) Regulations, 1995 require FIIs to enter into secondary market transactions only through stock brokers registered with SEBI. This is also a condition of the FERA approval granted to FIIs by the Reserve Bank of India. These provisions preclude an FII from tendering their shares in an open offer made in terms of the SEBI (Substantial Acquisition of Shares and Take-overs) Regulations, 1997. 
3. To facilitate the participation of FIIs in open offers the Board approved amendments to the SEBI (Foreign Institutional Investors) Regulations, 1995 permitting FIIs to tender their securities directly in response to an open offer made in terms of the SEBI (Substantial Acquisition of Shares and Take-overs) Regulations, 1997.
Simplification of the procedure for sub-account registration
4. The Board approved the simplification of the process of approval for sub-accounts of registered FIIs. FIIs would now only be required to submit an undertaking that sub-accounts for whom they are seeking registration meet with all of the criteria mentioned in the regulations for sub-account registration. Further, no documents beyond the application and undertaking would be required to be submitted. 

 5. In conjunction with the simplified registration procedure, a US$1,000 registration fee for sub-accounts would now be charged. This fee would be paid at the time of application itself.
Investment by FIIs in Derivative Instruments

6. The Board had approved the report of the Dr. L C Gupta Committee and the Suggestive Byelaws for Regulation and Control of Derivative Contracts in its meeting held on May 11, 1998. As FIIs are potentially active participants in the derivatives markets, it was felt that the presence of FIIs and domestic institutions would be critical to the success of the market. The Board therefore approved amendments to the regulations to permit FIIs to buy and sell derivative contracts which are traded on a stock exchange. FIIs will also be permitted to trade in derivatives without requiring them to take delivery and give delivery.

The amendments will come into effect upon their notification in the Official Gazette, which is expected shortly.

June 23, 1998