Clarifications regarding investment by Foreign Institutional Investors - SEBI - FITTC/CUST/12/2001

FC DIVISION FITTC DEPARTMENT EMAIL:[email protected] WEB- SITE:www.sebi.gov.in FAX NO: 91 22 2845776 Circular No.FITTC/CUST/12/2001 June 04, 2001 TO All Foreign Institutional Investors and Custodians of Securities Dear Sir/Madam, Sub : Clarifications regarding investment by Foreign Institutional Investors Some FIIs/ sub accounts which are not desirous of renewing registration but are holding certain unsaleable securities / securities of nominal value have approached SEBI seeking permission to hold such securities after the expiry of registration. This may happen due to reasons beyond control of the FIIs/Sub accounts such as securities being illiquid or being held up as an objection case/ court order. The Securities and Exchange Board of India (Foreign Institutional Investors ) Regulations, 1995 have, therefore, been amended to permit such FIIs/Sub accounts to hold residual securities for subsequent disposal, after the expiry of FIIs/Sub accounts registration subject to receipt of specific permission from SEBI in this regard. The procedure for seeking such permission is given in this circular. Further, to facilitate a more co-ordinated compliance by FIIs with SEBI Regulations and directives as well as easier communication between FIIs and SEBI, appointment of a compliance officer by FIIs is being stipulated. Information regarding compliance officer required to be submitted to SEBI is explained in this circular. A. Permitting disinvestment after expiry of registration The procedure for seeking permission for disinvestment by FIIs after expiry of registration is given below: 1. At the time of expiry of registration, the FII desiring permission for disinvestment for itself or its sub account/s shall make a request to SEBI along with details of its holdings as per format in Annexure- A. Such requests shall be submitted within 45 days of expiry of registration (For those FIIs/Sub accounts whose registration has expired before the date of this circular, requests can be made within one month from the date of this circular) 2. SEBI would, if appropriate, grant such permission for a period of 6 months under intimation to the Reserve Bank of India (RBI) requesting the latter to grant necessary approval under Foreign Change Management Act at it s end. The required sale trades can be carried out after the receipt of RBI s approval. 3. The permission would generally permit only sale of the securities held by the FII/SA as on date of expiry of registration. No purchase transactions shall be undertaken after the expiry of registration. However, credit of corporate benefits and application for rights issue in respect of existing securities would be permitted. Ina case any fresh purchase transactions are undertaken, the FII would be bound to seek fresh registration besides being liable for penal action for making investments without holding valid registration. 4. FIIs and their custodians shall be responsible for reporting these trades carried out as per the SEBI permission appropriately. 5. If the FII is unable to sell the seucties within 6 months, it can approach SEBI for extension and be also accompanied by a statement of current holdings in the required format. These requests would be granted based on the merits of the case. B. Appointment of compliance officer All FIIs are requested to provide the same, designation and contact particulars including email did of the compliance officer who would be responsible for compliance with the provisions of the SEBI (FII) Regulations, 1995 and the other relevant provisions. This information may be submitted by letter, fax or email so as to reach SEBI by June 30, 2001. The relative addresses/ fax numbers are mentioned on the top of this circular. A copy of this circular is also available at the web page Foreign intuitional Investors on our web site www.sebi.gov.in. The custodians are requested to bring the contents of this circular to the notice of their FII clients. Yours faithfully P. Gupta Division Chief Encl.: Annexure A LIST OF HOLDINGS OF FII/ SUB ACCOUNT Name of the FII: Registration number: Date of expiry of registration: {Name of the Sub account: Registration Number :} S.No. Name of the company Type of security (Non converible debentures [NCD] / PCD/ Shares / warrants , etc.) No. of securities held * Authorized Signatory of sub account/ client: ____________________ (Name of the sub account) ________ (Signature) Authorized Signatory of FII: _____________________ (Name of the sub account) _________ (Signature) * wherever applicable (Note: a separate form may be used for the FII and each sub account on hose behalf extension is sought)