Setting up of Foreign Institutional Investors(FII):
The term Foreign Institutional Investor is defined by SEBI as “an institution established or incorporated outside India which proposes to make investment in India in securities, 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.”
According to SEBI regulations, the following conditions have to be adhered to for registration as FII-
i) An institution established or incorporated outside India as a pension fund, mutual fund, investment trust, insurance company, or reinsurance company
ii) An international or multilateral organization or an agency thereof, or a foreign governmental agency, sovereign wealth fund, or a foreign central bank
iii) Overseas Asset Management Company, investment manager or advisor, bank or institutional portfolio manager, proposing to make investments in India on behalf of broad-based funds and its proprietary funds, if any
iv) Trustee of a trust established outside India, and proposing to make investments in India on behalf of broad based funds and its proprietary, if any
v) University fund, endowments, foundations or charitable trusts, or charitable societies, etc.
According to RBI regulations, namely the Foreign Exchange Management (Transfer or issue of security by a person resident outside India), 2000 vide Notification No. FEMA 20/2000-RB Dated May 2000, have to be adhered to for registration as FII- under regulations Schedules 1, 2 and 5 are required.
Application for certificate registration of Foreign Institutional Investor:
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 (Retrospective effect),
(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.
Modes of Investment:
- Foreign direct Investments,
- Foreign portfolio Investments,
- Other Investments.