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Published by: manoraman on Mar 20, 2010
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Foreign Institutional Investor (FII) is used to denote an investor - mostly of the form of an institution or entity, which invests money in the financial markets of a country different from the one where in the institution or entity was originally incorporated.FII investment is frequently referred to as hot money for the reason that it canleave the country at the same speed at which it comes in.In countries like India, statutory agencies like SEBI have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs. In 2008, FIIs represented the largest institution investment category, with an estimated US$ 751.14 billion.[1]FEMA norms includes maintenance of highly rated bonds(collateral) with securityexchangeQ1. Who is a Foreign Institutional Investor (FII)?Ans. FII means an entity established or incorporated outside India which proposes to make investment in India.Q2. What is a sub-account?Ans. Sub-account includes those foreign corporations, 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.Q3. What is a Designated Bank?Ans. Designated Bank means any bank in India which has been authorized by the Reserve Bank of India to act as a banker to FII.Q4. Who is a Domestic Custodian?Ans. Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.Q5. What is a Broad Based Fund?Ans. Broad Based Fund means a 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 Q6. Who can get registered as FII?Ans. Following entities / funds are eligible to get registered as FII:1.Pension Funds2.Mutual Funds3.Insurance Companies4.Investment Trusts5.Banks6.University Funds7.Endowments8.Foundations9.Charitable Trusts / Charitable SocietiesFurther, following entities proposing to invest on behalf of broad based funds,are also eligible to be registered as FIIs:1.Asset Management Companies2.Institutional Portfolio Managers3.Trustees4.Power of Attorney HoldersQ7. What are the parameters on which SEBI decides FII applicants’ eligibility?Ans.a.Applicant’s track record, professional competence, financial soundness,experience, general reputation of fairness and integrity. (The applicant shouldhave been in existence for at least one year)
b.whether the applicant is registered with and regulated by an appropriateForeign Regulatory Authority in the same capacity in which the application is filed with SEBIc.Whether the applicant is a fit & proper person.Q8. Which form needs to be filled in when applying for FII registration?Ans. "Form A" as prescribed in SEBI (FII) Regulations, 1995.Q9. Which documents need to be sent with "Form A"?Ans.a.Certified copy of relevant clauses (clauses permitting the stated activities) of Memorandum of Association, Article of Association or Article of Incorporation.b.Audited financial statement and annual report for the last one year (period covered should not be less than twelve monthsQ10. How much is the fee for registration as FII?Ans. US $ 5,000.Q11. When is the registration fee payable?Ans. At the time of submitting the application for registration.Q12. What is the mode of payment?Ans. Demand Draft in favour of "Securities and Exchange Board of India" payableat New YorkQ13. How many days it takes to get registered as FII?Ans. SEBI generally takes seven working days in granting FII registration. However, in cases where the information furnished by the applicants is incomplete, seven days shall be counted from the days when all necessary information sought, reaches SEBI.In cases where the applicant is bank and subsidiary of a bank, SEBI seeks comments from the Reserve Bank of India (RBI). In such cases, 7 working days would becounted from the day no objection is received from RBI.Q14. What is the registration process for FII?Ans. Please contact us for registration. Q15. What is the validity period of FII registration?Ans. The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to be renewed.Q16. What is the process of renewal?Ans. Same as initial registration. Along with "Form A" and all the relevant documents, the applicants are required to fill in additional form (Annexure 1) whileapplying for renewal.Q17. Is there any renewal fee?Ans. Yes, US $ 5,000 needs to be paid for renewal of FII registration.Q18. When the application for renewal should be submittedAns. Three months before expiry of the FII registration.Q19. What are 100 % debt FIIs/sub-accounts, and what is the process for their registration?Ans. 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 besides a clear statement by the applicant that it wishes to be registered as FII/sub-account under 100% debt route.Q20. Where the application for FII registration should be sent?Ans. The FII registration application should be sent to:Securities and Exchange Board of IndiaDivision of FII & CustodianMittal Court "B" Wing, First Floor224, Nariman PointMumbai 400 021IndiaNote: In case the applicant is a ‘Bank’ or "Subsidiary of a Bank" then the application form and relevant documents need to be submitted in duplicates.SUB-ACCOUNT REGISTRATION
 Q21. Who can get registered as sub-account?Ans.a.Institution or funds or portfolios established outside India, whether incorporated or not.b.Proprietary fund of FII.c.Foreign Corporatesd.Foreign IndividualsQ22. Who need to apply for sub-account registration?Ans. The FII should apply on the behalf of the Sub-account. Both the FII and theSub-account are required to sign the Sub-account application form.Q23. Which form needs to be filled when applying for sub-account registration?Ans. "Annexure B" to "Form A" (FII application form).Q24. What documents need to be sent with Annexure A?Ans. NoneQ25. How much is the fee for sub-account registration?Ans. US $ 1,000Q26. When is the registration fee payable?Ans. At the time of submitting the application.Q27. What is the mode of payment?Ans. Demand Draft in the name of "Securities and Exchange Board of India" payable at New YorkQ28. How many days it takes to get a sub-account registered?Ans. SEBI generally takes three working days in granting FII registration. However, in cases where the information furnished by the applicants is incomplete, three days shall be counted from the days when all necessary information sought, reaches SEBI.Q29. What is the validity period of sub-account registration?Ans. The validity of sub-account registration is co-terminus with the FII registration under which it is registered.Q30. What is the process of renewal of sub-account?Ans. Same as initial registration.Q31. Is there renewal fee?Ans. Yes, US $ 1,000Q32. Can OCBs / NRIs permitted to get registered as FII/sub-account?Ans. No, they are not permitted.POST-REGISTRATION PROCESSESQ33. What is the procedure in case the FII/sub-account changes its name?Ans. If a registered FII/sub-account undergoes name change, then the FII need topromptly inform SEBI about the change. It should also mention the reasons for the name change and give an undertaking that there has been no change in beneficiary ownership.In case of name change of FII, the request should be accompanied with documentsfrom home regulator and registrar of the company evidencing approval of name change, and the original FII registration certificate issued by SEBI should be sentback for necessary amendment.Q34. What is the procedure for transferring a sub-account from one FII to another?Ans. The FII to whom the Sub-account is proposed to be transferred has to send arequest along with a declaration that it is authorized to invest on behalf of the Sub-account. The transferor FII should also submit a No-objection certificate.Q35. What is the procedure for change of domestic custodian?Ans. The FII should send a request, along with no-objection certificate from existing domestic custodian, for change in domestic custodian.Q36. Can FII/sub-account registration be cancelled on request?Ans. Yes, the FII would be required to send a request for cancellation of its registration or registration of its Sub-account/s clearly mentioning the name andregistration number of the entity. The FII should ensure that it / Sub-account has nil cash / securities holdings.

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