Regulation 15 - Investment restrictions. - SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN INSTITUTIONAL INVESTORS) REGULATIONS, 1995

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 1 [unlisted], listed or to be listed on a recognised stock exchange in India; and (b) units of schemes floated by domestic mutual funds including Unit Trust of India, whether listed on a recognised stock exchange or not, 2 [units of scheme floated by a Collective Investment Scheme.] 3 [(c) dated Government Securities;] 4 [(d) derivatives traded on a recognised stock exchange;] 5 [(e) commercial paper;] 6 [(f) security receipts;] 32 [ (g) Indian Depository Receipts. ] 7 [(1A) Where a foreign institutional investor or sub-account holds equity shares in a company whose shares are not listed on any recognised stock exchange, and continues to hold such shares after initial public offering and listing thereof, such shares shall be subject to lock-in for the same period, if any, as is applicable to shares held by a foreign direct investor placed in similar position, under the policy of the Central Government relating to foreign direct investment for the time being in force]. 8 [(1B) Nothing contained in sub-regulation (1A) shall be deemed to prejudice the applicability of any other law, regulation or guideline.] (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 tradable 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: 9 [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 10 [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 debt securities by the foreign institutional investor on its own account or through its sub accounts:] 11 [Provided further that a foreign corporate or individual shall not be eligible to invest through the hundred percent debt route:] 12 [Provided further that the conditions mentioned in sun-regulation (2) shall not apply to investments made by foreign institutional investors in security receipts issued by securitization companies or asset reconstruction companies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules made there under: Provided further that no foreign institutional investor shall invest in security receipts on behalf of its sub account.] 13 [Explanation: For the purposes of the provisos to this sub-regulation, the expression debt securities shall include dated Government securities, 14 [commercial paper] 15 [, and treasury bills].]; (3) In respect of investments in the secondary market, the following additional conditions shall apply:- 16 [(a) a foreign institutional investor or sub-account shall transact in the Indian securities market only on the basis of taking and giving delivery of securities purchased or sold: Provided that nothing contained in this clause shall apply to any transactions in derivatives on a recognised stock exchange: Provided further that a foreign institutional investor or sub-account may enter into short selling transactions only in accordance with the framework specified by the Board in this regard;] (b) no transaction on the stock exchange shall be carried forward; and (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: 17 [Provided that transactions in government securities 18 [, commercial paper] 19 [including treasury bills] shall be carried out in a manner specified by the Reserve Bank of India:] 20 [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 21 [or to sale of securities by a Foreign Institutional Investor in response to an offer made by any promoter or acquirer in accordance with the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003]:] 22 [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 the Securities and Exchange Board of India (Buy-back of securities) Regulations, 1998:] 23 [Provided further that nothing contained in clause (c) shall apply to divestment of securities by the Foreign Institutional Investors in response to an offer by Indian Companies in accordance with Operative Guidelines for Disinvestment of Shares by Indian Companies in the overseas market through issue of American Depository Receipts (ADR) or Global Depository Receipts (GDR) as notified by the Government of India vide notification No.15/23/99-NRI, dated July 29, 2002 and directions issued by Reserve Bank of India from time to time under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999):] 24 [Provided further that nothing contained in clause (c) shall apply to any bid for, or acquisition of, securities by a Foreign Institutional Investor in response to an offer for disinvestment of shares made by the Central Government or any State Government:] 25 [Provided further that nothing contained in clause (c) shall apply to purchase or sale of security receipts by a foreign institutional investor;] 26 [(d) a Foreign Institutional Investor or a sub-account, shall, subject to such instructions as may be issued by the Board, deliver or cause to be delivered only securities in dematerialised form for settlement of its transactions undertaken on a recognised stock exchange, except in cases where the issuer of such securities has established connectivity with all depositaries registered with the Board under Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.] (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 27 [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 28 [ten] percent of the total issued capital of that company: 29 [Provided that in case of foreign corporates or individuals, each of such sub-account shall not invest more than 5% of the total issued capital of the company in which such investment is made.] (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 or borrow securities in accordance with the framework specified by the Board in this regard.] 31 [ Explanation - For the purposes of this regulation, the words security receipts , asset reconstruction , securitisation company and reconstruction company shall have the meanings respectively assigned to them under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.] -------------- Notes: 1. Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 1996 w.e.f. 9.10.1996. 2. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2008, w.e.f. 22-5-2008 3. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 1998 w.e.f. 20.4.1998. 4. Inserted by the SEBI (Foreign Institutional Investors) (Third Amendment) Regulations, 1998 w.e.f.30.6.1998. 5 . Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2001 w.e.f. 13.2.2001. 6 . Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2006 w.e.f. 26-6-2006. 7. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2008, w.e.f.22-5-2008. 8. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2008, w.e.f.22-5-2008. 9. Inserted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 1996 published in official Gazette of India dated 19.11.1996. 10. Inserted by the SEBI (Foreign Institutional Investors) (Third Amendment) Regulations, 1996, w.e.f. 30-6-1998. 11. Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000 w.e.f. 29.2.2000. 12. Inserted by the SEBI ((Foreign Institutional Investors) Amendment Regulations, 2006, w.e.f. 26.6.2006. 13. Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 1997 w.e.f. 12.2.1997. 14. Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2001, w.e.f. 13.2.2001. 15. Inserted by the SEBI (Foreign Institutional Investors) (second Amendment) Regulations, 1998 w.e.f. 18.5.1998. 16. Substituted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 2007 w.e.f. 21.4.2008. Prior to its substitution, clause (a) as amended by SEBI (FII) (Third Amendment) Regulations, 1998, w.e.f. 30-6-1998, read as under: (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: Provided that nothing contained in clause (a) shall apply in respect of transactions in derivatives traded on a recognized stock exchange; 17. Inserted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 1997 , w.e.f. 10-7-1997. 18. Inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2001 w.e.f. 13.2.2001. 19. Inserted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulation, 1998 w.e.f. 18.5.1998. 20. Inserted by the SEBI (Foreign Institutional Investors) (Third Amendment) Regulations, 1998 w.e.f. 30.6.1998. 21. Inserted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 2004 w.e.f. 19.2.2004. 22. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 1999 w.e.f. 16.4.1999. 23. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, w.e.f. 14-5-2003. 24. Inserted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 2004 w.e.f. 19.2.2004. 25. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2006, w.e.f. 26.6.2006. 26. Substituted for the clause (d) by the SEBI (Foreign Institutional Investor) (Amendment) Regulations 2007, w.e.f. 8-1-2007. Prior to substitution Clause (d) was inserted by the SEBI (Foreign Institutional Investors) (Third Amendment) Regulations, 1997 w.e.f. 5.12.1997 and read as follows: (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. 27. Substituted for five by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 1996 w.e.f. 9.10.1996. 28. Substituted for five by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 1996 w.e.f. 9.10.1996 29. Substituted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 2000 w.e.f. 29.10.2000. Earlier it was inserted by the SEBI (Foreign Institutional Investors) Amendment Regulations, 2000, w.e.f. 29.02.2000.Prior to its substitution it read as under: Provided that in case of foreign corporates or individuals, all the investments made by all foreign corporates or individuals together as sub-accounts, shall not exceed 5% of the total issued capital of the company in which such investment is made. 30. Substituted by the SEBI (Foreign Institutional Investors) (Second Amendment) Regulations, 2007, w.e.f.31-12-2007. Prior to substitution Regulation 15(8) read as under: A Foreign Institutional Investor or sub-account may lend securities through an approved intermediary in accordance with stock lending scheme of the Board. 31. Inserted by the SEBI (Foreign Institutional Investors) (Amendment) Regulations, 2006 w.e.f. 26.6.2006. 32. Inserted vide Notification No. LAD/NRO/GN/2009-10/10/166936 dated 19-06-2009