FII registration process: Sebi FAQ

Originally Posted by SEBI

Who is a Foreign Institutional Investor (FII)?
FII means an entity established or incorporated outside India which proposes to make investment in India.
What is a 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.
What is a Designated Bank?
Any bank in India which has been authorized by the Reserve Bank of India to act as a banker to FII.
Who is a Domestic Custodian?
Any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.
What is a Broad Based Fund?
Fund established or incorporated outside India, which has at least twenty investors with no single individual investor holding more than 10% shares or units of the fund.
Provided that if the fund has institutional investor(s) it shall not be necessary for the fund to have twenty investors.
Provided further that if the fund has an institutional investor holding more than 10% of shares or units in the fund, then the institutional investor must itself be broad based fund.
FII REGISTRATION
Who can get registered as FII?
Following entities / funds are eligible to get registered as FII:
1. Pension Funds
2. Mutual Funds
3. Insurance Companies
4. Investment Trusts
5. Banks
6. University Fund s
7. Endowments
8. Foundations
9. Charitable Trusts / Charitable Societies

Further, following entities proposing to invest on behalf of broad based funds, are also eligible to be registered as FIIs:
1. Asset Management Companies
2. Institutional Portfolio Managers
3. Trustees
4. Power of Attorney Holders

How much is the fee for registration as FII?
US $ 5,000. Demand Draft in favour of “Securities and Exchange Board of India” payable at New York
How many days it takes to get registered as FII?
SEBI generally takes seven working days in granting FII registration.

What is the validity period of FII registration?
valid for 5 years. After expiry of 5 years, the registration needs to be renewed.US $ 5,000 needs to be paid for renewal of FII registration.
What are 100 % debt FIIs/sub-accounts, and what is the process for their registration?
100 % debt FIIs are debt dedicated FIIs which invest in debt securities only. The procedure for registration of FII/sub-account, under 100% debt route is similar to that of normal funds
Who can get registered as sub-account?
a) Institution or funds or portfolios established outside India, whether incorporated or not. b) Proprietary fund of FII.
c) Foreign Corporates
d) Foreign Individuals
How much is the fee for sub-account registration?
US $ 1,000
Can OCBs / NRIs permitted to get registered as FII/sub-account?
they are not permitted.
What if the FII does not renew its/sub-account’s registration?
The registration of the FII / Sub-account would get expired at due date and it would not be allowed to trade in Indian securities markets.

Which financial instruments are available for FII investments?
a) 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; b) Units of mutual funds; c) Dated Government Securities; d) Derivatives traded on a recognized stock exchange ; e) Commercial papers.
What are the investment limits on equity investments by FII/sub-account?
a) FII, on its own behalf, shall not invest in equity more than 10% of total issued capital of an Indian company.
b) Investment on behalf of each sub-account shall not exceed 10% of total issued capital of an India company. c) For the sub-account registered under Foreign Companies/Individual category, the investment limit is fixed at 5% of issued capital.
These limits are within overall limit of 24% / 49 % / or the sectoral caps a prescribed by Government of India / Reserve Bank of India.
What are the investment limits on debt investments by FII/sub-account?

100 % Debt Route US $ 1.75 billion
70 : 30 Route US $ 0.25 billion
Total Limit US $ 2.00 billion

For corporate debt 100 % Debt Route US $1.35 billion
70 : 30 Route US $0.15 billion Total Limit US $1.5 billion

What other investment limits are there?
Normal FII (70:30 Route) 100% Debt FII
Total investment in equity and equity related instruments shall not be less than 70% of aggregate of all investments.100% investment shall be made in debt security only.
DERIVATIVES POSITION LIMITS
What are the restrictions on investment in derivatives?
The FII position limits in a derivative contracts (Individual Stocks)

For stocks in which the market wide position limit is less than or equal to Rs. 250 Cr, the FII position limit in such stock shall be 20% of the market wide limit.

For stocks in which the market wide position limit is greater than Rs. 250 Cr, the FII position limit in such stock shall be Rs. 50 Cr.
FII Position limits in Index options contracts
FII position limit in all index options contracts on a particular underlying index shall be Rs. 250 Crore or 15 % of the total open interest of the market in index options, whichever is higher, per exchange.
This limit would be applicable on open positions in all option contracts on a particular underlying index.
FII Position limits in Index futures contracts:
FII position limit in all index futures contracts on a particular underlying index shall be Rs. 250 Crore or 15 % of the total open interest of the market in index futures, whichever is higher, per exchange.
FIIs shall take exposure in equity index derivatives subject to the following limits:

i. Short positions in index derivatives (short futures, short calls and long puts) not exceeding (in notional value) the FII’s holding of stocks.
ii. Long positions in index derivatives (long futures, long calls and short puts) not exceeding (in notional value) the FII’s holding of cash, government securities, T-Bills and similar instruments.
FII Position Limits in Interest rate derivative contracts
At the level of the FII
The notional value of gross open position of a FII in exchange traded interest rate derivative contracts shall be:
i. US $ 100 million.
ii. FII may take exposure in exchange traded in interest rate derivative contracts to the extent of the book value of their cash market exposure in Government Securities.

At the level of the sub-account
The position limits for a Sub-account in near month exchange traded interest rate derivative contracts shall be higher of:
· Rs. 100 Cr
or
· 15% of total open interest in the market in exchange traded interest
rate derivative contracts.
OFFSHORE DERIVATIVES/PARTICIPATORY NOTES

Can FII/sub-account issue Offshore Derivatives / Participatory Notes?
Yes
Who can subscribe to/invest in Participatory Notes?
a) Any entity incorporated in a jurisdiction that requires filing of constitutional and/or other documents with a registrar of companies or comparable regulatory agency or body under the applicable companies legislation in that jurisdiction;
b) Any entity that is regulated, authorised or supervised by a central bank, such as the Bank of England, the Federal Reserve, the Hong Kong Monetary Authority, the Monetary Authority of Singapore

c) Any entity that is regulated, authorised or supervised by a securities or futures commission, such as the Financial Services Authority (UK), the Securities and Exchange Commission (Sub-account), the Commodities Futures Trading Commission (Sub-account), the Securities and Futures Commission (Hong Kong or Taiwan), Australian Securities and Investments Commission (Australia) or other securities or futures authority or commission in any country , state or territory ;
d) Any entity that is a member of securities or futures exchanges such as the New York Stock Exchange (Sub-account), London Stock Exchange (UK), Tokyo Stock Exchange (Japan), NASD (Sub-account)
e) Any individual or entity (such as fund, trust, collective investment scheme, Investment Company or limited partnership) whose investment advisory function is managed by an entity satisfying the criteria of (a), (b), (c) or (d) above