THE GAZETTE OF INDIA EXTRAORDINARY PART II - SECTION 3 - SUB-SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION BOMBAY THE 14th DAY OF NOVEMBER 1995
SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN INSTITUTIONAL INVESTORS) REGULATIONS, 1995
SEBI/LE/918(E) 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. (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
2. 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;
1*[(cc) �domestic asset management company� means an asset management company approved by the Board under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and who has been granted certificate of registration under Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993]
(d) "domestic custodian" includes any person carrying on the activity of providing custodial services in respect of securities;
2*[(dd) �domestic portfolio manager� means a portfolio manager registered under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993.]
3*[(e) ***]
(f) "Foreign Institutional Investor" means an institution established or incorporated outside India which proposes to make investment in India in securities;
4*[�Provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor.�]
(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" includes 5*[foreign corporates or foreign individuals and] those institutions, established or incorporated outside India and those funds, or portfolios, established outside India, whether incorporated or not, on whose behalf investments are proposed to be made in India by a Foreign Institutional Investor.
1. Sub-regulation "cc" inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000 published in the Official Gazette of India, dated 29.02.2000.
2. Sub-regulation "dd" inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000 published in the Official Gazette of India, dated 29.02.2000.
3. Omitted by the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations,2002 published in the Official Gazette of India, dated 27.09.2002.
4. Proviso inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000 published in the Official Gazette of India, dated 29.02.2000.
5. �foreign corporates or foreign individuals and" inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000 published in the Official Gazette of India, dated 29.02.2000.
CHAPTER II REGISTRATION OF FOREIGN INSTITUTIONAL INVESTOR
Application for certificate
3. (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 sub-regulation (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
4. (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
5. 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
6 (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;
(b) whether the applicant is regulated by an appropriate 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 Pension Fund or Mutual Fund or Investment Trust; or
(ii) an Asset Management Company or Nominee Company or Bank or Institutional Portfolio Manager, established or incorporated outside India and proposing to make investments in India on behalf of broad based funds 6*[and its proprietary funds, if any;] or
(iii) a Trustee or a Power of Attorney holder, incorporated or established outside India, and proposing to make investments in India on behalf of broad based funds 6*[and its proprietary funds, if any]
7*[(iv) university fund, endowments, foundations or charitable trusts or charitable societies.
Provided that while considering the application from the 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 atleast 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.]
Explanation:
For the purposes of this regulation, "broad based fund" means a fund, established or incorporated outside India, which has at least fifty 8*[twenty] investors, with no single individual investor holding more than five 9*[ten] 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 fifty 8*[twenty]investors:
Provided further that if the broad based fund has an institutional investor who holds more than five 9*[ten] percent of the shares or units in the fund, then the institutional investor must itself be a broad based fund; or
(e) Whether the grant of certificate to the applicant is in the interest of the development of the securities market.
10*[(f) Whether the applicant is a fit and proper person.]
11*[(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.
(c) For the grant of certificate to a domestic asset management company or to a domestic portfolio manager the Board shall consider the following:
(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
7. 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.
12*[�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.�]
13*[Provided further that a domestic portfolio manager or domestic asset management company shall not be liable to pay fee.�]
Validity of certificate
8. The certificate and each renewal thereof shall be valid for a period of five years from the date of its grant or renewal, as the case may be.
14*[�Provided that in case of domestic portfolio manager or domestic asset management company the certificate and each renewal thereof shall be valid for a period not exceeding the validity or registration or approval granted under Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993 or Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as the case may be.
Provided further that the certificate of registration granted or approved under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993 or the securities and Exchange Board of India (Mutual Funds) Regulations, 1996, expires before the expiry of registration under these Regulations, or the certificate of such entity is suspended, the domestic portfolio manager or domestic asset management company shall cease to carry on any activity as foreign institutional investor and shall be subject to the directions of the Board with regard to the fund, securities or records that may be in its custody or control as a foreign institutional investor.�]
Application for renewal of certificate
9. (1) Three months before the expiry of the period of certificate, the Foreign Institutional Investor, if he so desires, may make an application for renewal in Form A.
15*[Provided that a Foreign Institutional Investor who does not desire to renew its registration or has failed to make an application for renewal under sub-regulation (1), shall , at the time of expiry of registration, obtain a specific permission from the Board , for disinvesting the securities held by it on its own account or on behalf of its sub-account(s), within a stipulated time period, subject to such terms and conditions as may be specified by the Board.
Provided further that where a Foreign Institutional Investor does not desire to renew registration of any of its sub-account(s) or has failed to make an application for renewal of registration of sub-account(s), the Foreign Institutional Investor shall at the time of expiry of registration ,obtain, a specific permission from the Board, for disinvesting the securities held by it on behalf of sub-account(s) within a stipulated time period, subject to such terms and conditions as may be specified by the Board]
(3) The Board shall, on such application, if satisfied that the applicant fulfils the requirements specified in regulation 6, grant a certificate in form B, subject to payment of fees in accordance with the Second Schedule.
Conditions for grant or renewal of certificate to foreign institutional investors
10. The grant or renewal 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 sub-account, if any, he shall obtain registration of such sub-account, under these regulations.
Procedure where certificate is not granted
11. (1) Where an application for grant or renewal 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 sub-regulation (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
12.(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.
(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 regulation.
Procedure and grant of registration of sub-accounts
13.(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 is an institution or fund or portfolio established or incorporated outside India and proposes to make investment in India;
(b) the applicant is a broad based fund 17*[or proprietary fund] 18*[or a foreign corporate or individual]
19*[(bb) the applicant is a fit and proper person.]
20*[�Provided that a non-resident Indian or an overseas corporate body registered with Reserve Bank of India shall not be eligible to invest as sub-account or as foreign institutional investor.�]
(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; and
(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.
21*[(e) The foreign institutional investor through whom the application for registration is made, has submitted undertakings that the sub-account fulfils the criteria referred to in this sub-regulation in a manner specified in para 2 of Annexure B to Form A of the First Schedule.
22*[(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)23*[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 sub-regulation (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).
(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 dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002.
