II Regulations in India: Investment by Foreign Institutional Investors (FIIs) is regulated under SEBI (FII) Regulations, 1995.

Following are some of important regulations by SEBI and RBI:

The total investments in equity and equity related instruments (including fully convertible debentures, convertible portion of partially convertible debentures and tradable warrants) made by a Foreign Institutional Investor in India, whether on his own account or on account of his sub- accounts, should be at least seventy per cent of the aggregate of all the investments of the Foreign Institutional Investor in India, made on his own account and through his sub-accounts. The cumulative debt investment limit for FII investments in Corporate Debt is USD 15 billion. The amount was increased from USD 6 billion to USD 15 billion in March 2009. USD 8 billion will be allocated to the FIIs and Sub-Accounts through an open bidding platform while the remaining amount is allocated on a first come first served basis subject to a ceiling of Rs.249 cr. per registered entity. The debt investment limit for FIIs in government debt in G-secs currently capped at $5 billion and cumulative investments under 2% of the outstanding stock of G-secs and no single entity can be allocated more than Rs. 1000 cr of the government debt limits. The Foreign Institutional Investor is allowed to transact business only on the basis of taking and giving deliveries of securities bought and sold. Short selling in securities is not allowed. However, in December 2007, abroad regulatory framework enabling short selling by FIIs was put in place. Which stipulated that naked short selling was not permitted and settlement of securities sold short would be through a mechanism for borrowing of securities. FIIs are not permitted to short sell equity shares which are in the caution list of RBI. Equity shares can be borrowed by FIIs only for the purpose of delivery into short sale. No transactions on the stock exchange can be carried forward. Transaction of business in securities can be carried out only through stock brokers who has been granted a certificate by the Board. A Foreign institutional Investor or a sub-account having an aggregate of securities worth rupees ten crore or more, as on the latest balance sheet date, can settle their only through dematerialised securities. Securities have to be registered in the name of the Foreign Institutional Investor, if he is making investments on his own behalf or in his name on account of his subaccount, or in the name of the sub-account, in case he is investing on behalf of the sub-account. The purchase of equity shares of each company by a Foreign Institutional Investor investing on his own account cannot exceed ten percent of the total issued capital of that company.

Investment by individual FIIs cannot exceed 10% of paid up capital. Investment by foreign registered as sub accounts of FII cannot exceed 5% of paid up capital. All FIIs and their subaccounts taken together cannot acquire more than 24% of the paid up capital of an Indian Company. An Indian Company can raise the 24% ceiling to the Sectoral Cap / Statutory Ceiling by passing a resolution by its Board of Directors followed by passing a Special Resolution to that effect by their General Body. For FIIs investing in the equity shares of a company on behalf of his sub-accounts, the investment on behalf of each such sub-account cannot exceed ten percent of the total issued capital of that company.

The FII position limits in a derivative contracts (Individual Stocks)

The FII position limits in a derivative contract on a particular underlying stock i.e. stock option contracts and single stock futures contracts are: 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 is 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 is Rs. 50 Cr.

FII Position limits in Index options contracts FII position limit in all index options contracts on a particular underlying index is Rs. 250 Crore or 15 % of the total open interest of the market in index options, whichever is higher, per exchange. This limit is applicable on open positions in all option contracts on any underlying index. FII Position limits in Index futures contracts FII position limit in all index futures contracts on a particular underlying index is Rs. 250 Crore or 15 % of the total open interest of the market in index futures, whichever is higher, per exchange. This limit is applicable on open positions in all futures contracts on a particular underlying index. In addition to the above, FIIs can take exposure in equity index derivatives subject to the conditions that :

Short positions in index derivatives (short futures, short calls and long puts) cannot exceed (in notional value) the FIIs holding of stocks. Long positions in index derivatives (long futures, long calls and short puts) can not exceed (in notional value) the FIIs holding of cash, government securities, TBills 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 is US $ 100 million. In addition to the above, FIIs can 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 is the higher of: Rs. 100 Cr Or 15% of total open interest in the market in exchange traded interest rate derivative contracts.

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; (d) "domestic custodian" includes any person carrying on the activity of providing custodial services in respect of securities; (e) "enquiry officer" means any officer of the Board, or any other person appointed by the Board under Chapter V of these regulations; (f) "Foreign Institutional Investor" means an institution established or incorporated outside India which proposes to make investment in India in securities; (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 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.

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. 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 1[ 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 2[ and its proprietary funds, if any ]; or 3 [ (iv) university fund, endowments, foundations or charitable trusts or charitable societies. Provided that while considering the application from applicants under clause (iv) the Board may take into account the following namely :a. b. c. d. whether the applicant has been in existence for a period of atleast 5 years; whether it is legally permissible for the applicant to invest in securities outside the country of its incorporation or establishment ; whether the applicant has been registered with any statutory authority in the country of their incorporation or establishment; 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 4[twenty] investors, with no single individual investor holding more than 5[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 6[twenty] investors: Provided further that if the broad based fund has an institutional investor who holds more than 7[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. [ 8(f) whether the applicant is a fit and proper person. ]
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:
9

[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. ]

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. 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 . (2) The application for renewal under sub-regulation (1) shall, as far as may be, be dealt with in the same manner as if it were an application made under sub-regulation (2) of regulation 3 for grant of a certificate. (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. (3) An application for registration as a sub-account shall contain particulars specified in 10 [ para 1 of Annexure B to form A of the first Schedule. ] 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 11[or proprietary fund ]; [12 (bb) the applicant is a fit and proper person. ] (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 subaccount is made, is authorised to invest on behalf of the sub-account. [13 (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. (f) The sub-account has paid registration fees in accordance with second schedule. ]
14

[ (2) 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).

Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide Notification no.S.O.105(E) dated 12.2.97. 2 Ibid 3 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996

vide Notification no.S.O.702(E) dated 9.10.96. 4

Substituted for "fifty" by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1999. 5 Substituted for "five" by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1999. 6 Substituted for "fifty" by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1999. 7 Substituted for "five" by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1999. 8 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment regulations, 1997 by notification no.S .O. 823(E) dated 5.12.97 9 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996 vide notification no.S.O.702(E) dated 9.10.96. 10 Substituted for "sub-para (b) of Para 5 of Form A" by Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 11 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide Notification no.S.O.105(E) dated 12.2.97. 12 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide Notification no.S.O.823(E) dated 5.12.97. 13 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 14 Substituted for "the Board on being satisfied that the applicant is eligible for a grant of registration shall grant registration to the sub-account." by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98.

CHAPTER III INVESTMENT CONDITIONS AND RESTRICTIONS

Commencement of investment 14. A Foreign Institutional Investor shall not make any investments in securities in India without complying with the provisions of this Chapter. Investment restrictions 15.(1) A Foreign Institutional Investor may invest only in the following:-

(a) securities in the primary and secondary markets including shares, debentures and warrants of companies 15 [ unlisted ] listed or to be listed on a recognised stock exchange in India; (b) units of schemes floated by domestic mutual funds including Unit Trust of India, whether listed on a recognised stock exchange or not 16 [ (c) dated Government securities] and 17 [ (d) derivatives traded on a recognised stock exchange.]
(2) Notwithstanding anything contained in sub-regulation (1) of this regulation, the total investments in equity and equity related instruments (including fully convertible debentures, convertible portion of partially convertible debentures and tradeable warrants) made by a Foreign Institutional Investor in India, whether on his own account or on account of his sub- accounts, shall not be less than seventy per cent of

the aggregate of all the investments of the Foreign Institutional Investor in India, made on his own account and on account of his sub-accounts.
18

[ Provided that nothing contained in sub-regulation (2) shall apply to any investment of the foreign institutional investor either on its own account or on behalf of its sub-accounts in debt securities which are 19 [unlisted or ] listed or to be listed on any stock exchange if the prior approval of the Board has been obtained for such investments." Provided further that the Board may while granting approval for the investments impose conditions as are necessary with respect to the maximum amount which can be invested in the debt securities by the foreign institutional investor on its own account or through its sub-accounts. ]
20

[ Explanation : For the purposes of the provisos to this sub-regulation, the expression "debt securities" shall include dated Government securities 21[ and treasury bills.] ] (3) In respect of investments in the secondary market, the following additional conditions shall apply:-

(a) the Foreign Institutional Investor shall transact business only on the basis of taking and giving deliveries of securities bought and sold and shall not engage in short selling in securities;
22

[ Provided that nothing contained in clause (a) shall apply in respect of transactions in derivatives traded on a recognised stock exchange.]

(b) no transactions on the stock exchange shall be carried forward; (c) the transaction of business in securities shall be only through stock brokers who has been granted a certificate by the Board under sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992;
23

[ Providedthat transactions in government securities 24[ including treasury bills ] shall be carried out in a manner specified by the Reserve Bank of India. ]
25

[Provided further that nothing contained in clause (c) shall apply to sale of securities by a Foreign Institutional investor in response to a letter of offer sent by an acquirer in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. ]
26

[ Provided further that in case of an offer by a company to buy back its securities, the foreign institutional investor, may sell the securities held by it to such company, in accordance with Securities and Exchange Board of India (Buy-back of securities) Regulations, 1998.]
27

[ (d) a Foreign institutional Investor or a sub-account having an aggregate of securities which are worth rupees ten crore or more, as on the latest balance sheet date, shall, subject to such instructions as may be issued from time to time by the Board, settle their transactions entered on or after January 15, 1998, only through dematerialised securities. ]
(4) Unless otherwise approved by the Board, securities shall be registered -

(a) in the name of the Foreign Institutional Investor, provided the Foreign Institutional Investor is making investments on his own behalf; or

(b) in his name on account of his sub-account, or in the name of the sub-account, in case he is investing on behalf of the sub-account:
Provided that the names of the sub-accounts on whose behalf the Foreign Institutional Investor is investing are disclosed to the Board by the Foreign Institutional Investor. (5) The purchase of equity shares of each company by a Foreign Institutional Investor investing on his own account shall not exceed 28[ ten ] percent of the total issued capital of that company. (6) In respect of a Foreign Institutional Investor investing in equity shares of a company on behalf of his sub-accounts, the investment on behalf of each such sub-account shall not exceed 29[ ten ] percent of the total issued capital of that company. (7) The investment by the Foreign Institutional Investor shall also be subject to Government of India Guidelines.
30

[ (8) A foreign Institutional Investor or sub-account may lend securities through an approved intermediary in accordance with the stock lending scheme of the Board.]

15

Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996 vide notification no.S.O.702(E) dated 9.10.96. 16 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.333(E) dated 20.4.98. 17 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 18 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996 vide notification no.S.O.799(E) dated 19.11.96. 19 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 20 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide notification no.S.O.105(E) dated 12.2.97. 21 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.417(E) dated 18.5.98. 22 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 23 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide notification no.S.O.495(E) dated 10.7.97. 24 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.417(E) dated 18.5.98. 25 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.545(E) dated 30.6.98. 26 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1999 vide notification no.S.O.263(E) dated 16.4.99. 27 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1997 vide notification no.S.O.823(E) dated 5.12.97. 28 Substituted for the word "five" by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996 vide notification no.S.O.702(E) dated 9.10.96. 29 Ibid 30 Inserted by Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no.S.O.333(E) dated 20.4.98.

CHAPTER IV GENERAL OBLIGATIONS AND RESPONSIBILITIES

Appointment of domestic custodian
16. (1) A Foreign Institutional Investor or a global custodian acting on behalf of the Foreign Institutional Investor, shall enter into an agreement with a domestic custodian to act as custodian of securities for the Foreign Institutional Investor. (2) The Foreign Institutional Investor shall ensure that the domestic custodian takes steps for (a) monitoring of investments of the Foreign Institutional Investor in India; (b) reporting to the Board on a daily basis the transactions entered into by the Foreign Institutional Investor; (c) preservation for five years of records relating to his activities as a Foreign Institutional Investor; and (d) furnishing such information to the Board as may be called for by the Board with regard to the activities of the Foreign Institutional Investor and as may be relevant for the purpose of this regulation. (3) A Foreign Institutional Investor may appoint more than one domestic custodian with prior approval of the Board, but only one custodian may be appointed for a single sub- account of a Foreign Institutional Investor.

Appointment of designated bank

17. A Foreign Institutional Investor shall appoint a branch of a bank approved by the Reserve Bank of India for opening of foreign currency denominated accounts and special non-resident rupee accounts. Maintenance of proper books of accounts, records, etc. 18. (1) Every Foreign Institutional Investor shall keep or maintain, as the case may be, the following books of accounts, records and documents, namely:

(a) true and fair accounts relating to remittance of initial corpus for buying, selling and realising capital gains of investment made from the corpus; (b) accounts of remittances to India for investments in India and realising capital gains on investments made from such remittances; (c) bank statement of accounts; (d) contract notes relating to purchase and sale of securities; and (e) communication from and to the domestic custodian regarding investments in securities.
(2) The Foreign Institutional Investor shall intimate to the Board in writing the place where such books, records and documents will be kept or maintained.

Preservation of books of accounts, records, etc.

19. Subject to the provisions of any other law, for the time being in force, every Foreign Institutional Investor shall preserve the books of accounts, records and documents specified in regulation 18 for a minimum

Information to the Board period of five years.

20. Every Foreign Institutional Investor shall, as and when required by the Board or the Reserve Bank of India, submit to the Board or the Reserve Bank of India, as the case may be, any information, record or documents in relation to his activities as a Foreign Institutional Investor as the Board or as the Reserve Bank of India may require.

CHAPTER V PROCEDURE FOR ACTION IN CASE OF DEFAULT

Cancellation or suspension of certificate 21. (1) A Foreign Institutional Investor who -

(a) fails to comply with any condition subject to which certificate has been granted; or (b) contravenes any of the provisions of the Act or these regulations, shall be liable to the penalty of(i) suspension of certificate for a specified period; or (ii) cancellation of certificate, after an enquiry as provided for in these regulations has been held.
(2) The provisions of these regulations shall be without prejudice to those of regulation 22 and regulation 23 . Suspension of certificate 22. A penalty of suspension of certificate of a Foreign Institutional Investor may be imposed if he -

(a) indulges in fraudulent transactions in securities; (b) fails to furnish any information related to his transaction in securities as required by the Board or the Reserve Bank of India; (c) furnishes false information to the Board; or (d) does not co-operate in any enquiry conducted by the Board.
Cancellation of certificate 23. A penalty of cancellation of certificate of a Foreign Institutional Investor may be imposed if he -

(a) indulges in deliberate manipulation or price rigging or cornering activities prejudicially affecting the securities market or the investors' interest;

(b) is guilty of fraud or a criminal offence, involving moral turpitude; (c) does not meet the eligibility criteria laid down in these regulations; (d) violates the provisions of the Securities and Exchange Board of India (Insider Trading) Regulations, 1992 or of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 1995, made under the Act; or (e) is guilty of repeated defaults of the nature mentioned in regulation 22 .
Explanation: In this regulation, "fraud" shall have the same meaning as is assigned to it in section 17 of the Indian Contract Act, 1872. Manner of making order of suspension and cancellation of certificate 24. No order of penalty of suspension or cancellation of certificate shall be imposed on the Foreign Institutional Investor except after holding an enquiry in accordance with the procedure specified in regulations 25 and regulation 26 . Manner of holding enquiry 25.(1) For the purpose of holding the enquiry referred to in regulation 24 , the Board may appoint an enquiry officer. (2) The enquiry officer shall issue to the Foreign Institutional Investor a notice at the principal place of business of the Foreign Institutional Investor setting out the default alleged to have been committed by the Foreign Institutional Investor and calling upon him to show cause why the penalties specified in regulation 21 should not be imposed on him. (3) The Foreign Institutional Investor may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply, together with copies of documentary or other evidence relied on by him in support of its reply: Provided that the enquiry officer may call upon him to supply further information. (4) The enquiry officer shall, give a reasonable opportunity of hearing to the Foreign Institutional Investor to enable him to make submission in support of his reply under sub- regulation (3) of this regulation. (5) Before the enquiry officer, the Foreign Institutional Investor may either appear in person or through any person duly authorised by him in writing. (6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case. (7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the Foreign Institutional Investor and by the presenting officer, if appointed under sub-regulation. (8) above, submit a report to the Board and recommend the penalty if any to be awarded along with the justification for such penalty. Show cause notice and order

26.(1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice to the Foreign Institutional Investor as to why the penalty, which it considers appropriate and which shall be specified in the notice should not be imposed. (2) The Foreign Institutional Investor shall within twenty-one days of the date of the receipt of the showcause notice referred to in sub-regulation (1), of this regulation send to the Board a reply to the notice. (3) The Board after considering the reply to the show-cause notice, if received in time, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit. (4) Every order passed under sub- regulation (3) of this regulation shall be self-contained and give reasons for the conclusions stated therein including the justification for the penalty, if any, imposed by that order. Effect of suspension and cancellation of certificate 27.(1) On and from the date of the suspension of certificate, if ordered under this Chapter, the Foreign Institutional Investor shall cease to buy, sell or otherwise deal in securities in India during the period of suspension. (2) On and from the date of cancellation of certificate, if ordered under this Chapter, the Foreign Institutional Investor shall cease to buy, sell or otherwise deal in securities in India, except for the purpose of liquidating the existing investments. Publication of order of suspension and cancellation of certificate 28. The order of suspension or cancellation of certificate under this Chapter shall be published by the Board in at least two daily newspapers. Appeal 29. Any Foreign Institutional Investor aggrieved by an order of the Board under the regulations may prefer an appeal to the Central Government under the provisions of the Securities and Exchange Board of India (Appeal to the Central Government) Rules, 1993.

ANNEXURE A
Additional details to be provided by applicants under clause (iv) of sub-regulation (d) of regulation 6 of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995: 1. Please indicate whether the applicant belongs to any one or more of the following categories ; University funds, endowments, foundations or charitable trusts or charitable societies. 2. Please provide details of the sponsors or organisers of the applicant, the objectives of the applicant, the nature of activities carried on by the applicant and state whether it has invested in securities markets outside the country in which it has been incorporated or established.

3. Please state whether the applicant is registered with any statutory authority in the country of its incorporation or establishment. 4. Please describe the manner in which the funds of the applicant are being managed. 5. Please enclose a copy of the applicant's charter or other documents of incorporation or establishment. ]

32

Inserted by the Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1996 vide notification no. S.O. 702 (E) dated 9.10.96.

ANNEXURE B
[See Regulation 12(3), 13(1) (e) and para 5(b) of Form A] Additional information and undertakings to be provided in respect of each client for which sub-account registration is sought, in terms of sub-regulation (1) of regulation 13 of the Securities and Exchange Board of India (Foreign Institutional Investors) 1995 : 1. Sub-account to provide the following details : i. ii. iii. iv. Name of the client / sub-account Date and place of incorporation or establishment of the client / sub-account Constitution of the client / sub-account (i.e. Partnership Firm, Private Company, Public Company, Pension Fund, Mutual Fund, Investment Trust etc.)" Name of domestic custodian and designated bank to be used by the client / sub-account.

Authorised Signatory of sub-account ________________ _____________/ client (Name of sub-account) (Signature) Forwarded by FII ________________ _____________ (Name of FII) (Signature) 2. Please provide the following undertakings by the FII in respect of the client / sub-account: A. "We hereby undertake that the ___________ (give name of client / sub-account) is i. ii. iii. iv. v. an institution or fund or portfolio established or incorporated outside India and proposes to make investment in India ; a broad based fund in terms of regulation [or proprietory fund of the Foreign Institutional Investor mentioned in ( i) above ] (mention whichever is applicable ); the Foreign Institutional Investor (give name and SEBI registration number) through whom the application for registration is made to the Board holds a certificate of registration as Foreign Institutional Investor, and 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." B "We also undertake in rspect of our client / sub-account, __________ (give name of the client / sub-account) that ;

a. b. c. d. e. f.

the client / sub-account or its directors have not been convicted by a Court for any offence involving moral turpitude or fraud and sentenced in respect thereof to imprisonment for a period greater than six months; no winding up orders have been passed against the client / sub-account; no order suspending or debarring the client / sub-account from permanently carrying on activities in the financial sector has been passed by any regulatory authority; no order withdrawing or refusing to grant any license / approval to the client / sub-account which has a bearing on the securities market has been passed by any authority in the preceding five years; any penalty imposed (including monetary penalty) by any regulatory authority has been carried out." C. "In case the client / sub-account is a broad based fund, please provide the following further undertaking :

"We undertake that the proprietary funds of ____________ (give name of the foreign institutional investor) shall not be invested through the client / sub-account." OR In case the client / sub-account is a proprietary fund of the Foreign Institutional Investor, please provide the following further undertaking : "We undertake that only the proprietary funds of the ______________ (give name of the Foreign Institutional Investor shall be invested through the client / sub-account." We hereby agree and declare that the information provided and the undertakings given above are complete and true. And we further agree that we will immediately notify the Securities and Exchange Board of India and the Reserve Bank of India of any change in the information provided. Authorised Signatory of FII _________________ _______________) (Name of FII) (Signature)

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Inserted by the Securities and Exchange Board of India (Foreign Institutional Investors) Amendment Regulations, 1998 vide notification no. S.O. 545 (E) dated 30.6.98.

SECOND SCHEDULE

PAYMENT OF FEES
( regulation 7 ) SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN INSTITUTIONAL INVESTORS) REGULATIONS, 1995.

1) Every applicant eligible for grant of a certificate under regulation 7 shall pay a registration fee of US$ 10,000. 2) The registration fee shall be payable at the time of initial registration as well as at the time of each renewal, within 15 days from the date of intimation from the Board.
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[ 2 (A) an application for registration of sub-account under regulation 12 shall be accompanied by a registration fee of US $ 1,000" which shall be payable at the time of initial application for registration as well as at the time of each renewal, and fees paid in respect of renewal shall be paid within 15 days of intimation by the board.]
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[3) The registration fee specified above shall be payable by the applicant by a draft in favour of "Securities and Exchange Board of India" or by any other appropriate mode or instrument as may be specified by