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SEBIs new regulations for FIIs

Market regulator Security Exchange Board of India recently notified new rules for foreign investments through financial instruments such as participatory notes, asking FIIs to wind up P-Notes for investing in derivatives within 18 months.SEBI also commanding curbs on P-Notes for investing in spot market.In derivatives, foreign institutional investors (FIIs) and their sub-accounts cannot issue fresh P-Notes and will have to conclude their current position in 18 months. In spot market, FIIs will not be permitted to issue P-Notes more than 40 % of their assets under custody. The reference date for manipulative such assets will be September 30.

Those FIIs who have issued P-Notes of more than 40 % of their assets could concern such instruments only if they cancel, redeem, or close their existing PNs. Those FIIs who have issued P-Notes less than 40 % of their assets under safekeeping can issue additional instruments at the rate of 5 per cent of their assets.

Highlights of New Rules

  • Unregulated pension fund, university fund, charitable fund, endowments etc to be treat as FIIs
  • No dilution of know-your-customers norms for registration of FIIs to avoid money laundering
  • FIIs to be registered on a permanent basis instead of former practice of renewing registration every three years

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