Securities and Exchange Board of India [SEBI] has amended the instructions for filling applications for registration of a Foreign Institutional Investor [FII] and sub-account of FII. Applicants are now required to provide additional declarations and undertakings along with the application form for registration of FII / sub-account of FII.

Declarations

a) The applicant declares that it is not a Protected Cell Company (PCC] or Segregated Portfolio Company (SPC] and does not have an equivalent structure by whatever nomenclature.

b) The applicant declares that it is not a Multi Class Share Vehicle (MCV] by constitution and does not have an equivalent structure by whatever nomenclature. It contains only single class of share.

c) The applicant declares that it is a MCV by constitution and has more than one class of shares or has an equivalent structure and that a common portfolio is maintained for all classes of shares and satisfies broad based criteria.

OR

c) A segregated portfolio is maintained for separate classes of shares wherein each such class of shares are in turn broad based.

Undertakings

[To be provided by an applicant which is / proposed to be a MCV or an equivalent structure and have more than one class of shares]

a) Common portfolios shall be allocated across various share classes and it shall be broad based;

OR

a) If portfolios are segregated for each distinct share class, then each such share class shall satisfy the broad based criteria;

b) In case of change in structure/ constitution/! addition of classes of shares, prior approval of SEBI shall be taken;

c) In case of any addition of share classes, it shall follow the criteria at (a) above.

  • If the applicant is or proposed to be a MCV having common portfolio for various classes of shares
    or segregated portfolio for various classes of shares, each such classes need to be broad based.
  • All applications made for registration of FII / sub-account after 7 April 2010 shall contain above declarations and undertakings.
  • As per the instructions issued by SEBI to the custodians of FII, all FIIs and sub-accounts which have been registered without providing such declarations and undertakings are required to submit to their custodians the above referred declarations and undertakings. The custodians in turn are required to forward the same to SEBI before 30 September 2010.

Analysis

  • There is no change made in the SEBI (Foreign Institutional Investors) Regulations 1995, regarding the eligibility criteria for registration of FII or its sub-account. SEBI has also not defined the terms PCC / SPC / MCV.
  • SEBI has not made clear what consequences would follow for existing PCC / SPC / MCV that have been already granted registration as FII / sub-account.

Source: Instructions for filling in the Form A and Form AA issued by SEBI.

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