SEBI to notify new FII registration norms

NEW DELHI: To put an end to the uncertainties over FII investments in the country, market regulator SEBI is set to notify the new guidelines for their registration. Accordingly, entities registered in non-International Organization of Securities Commissions (IOSCO)-compliant jurisdiction may not be able to register as FII here.

“The circular will be issued soon. We were ready with it a month ago but we thought it was better to wait and hold it back for more clarity. There were a couple of definital issues we needed to tackle,” SEBI chairman M Damodaran said.

The Sebi board had on October 25 agreed to certain changes to the registration criterion for foreign investors. These included broad-basing of certain conditions. The broad-based criterion will now be modified to include entities having at least 20 investors, no single investor holding more than 49% (against 10% at present).

With the issuance of circular, investors will be able to register as per the new broad-based condition. A large number of investors investing into India through participatory notes wanted to register directly and have been keenly waiting for the circular.

Entities regulated by an IOSCO compliant regulator will be able to register as an investor while entity from a non-compliant jurisdiction will not be able to do so.

“The International Organization of Securities Commissions has a finite list of non-cooperative jurisdictions. We will not register a foreign investor domiciled in such a jurisdiction. We have an international obligation to discriminate against them. They are in any case few and far between. IOSCO’s task force on dealing with these jurisdictions constantly persuades them to come on board. A few have complied in recent months and the list is becoming shorter,” he said.

Headquartered in Spain, IOSCO is an international standard-setting body for securities markets with its norms applicable in over 90% of world’s securities markets. It is mandatory for all IOSCO members to sign a memorandum of understanding and follow the principles endorsed by the body and facilitate exchange of information among the international community of securities regulators.

Market regulators in some countries that are also popular tax-havens responsible for substantial quantum of foreign fund flow into the country have MoUs with IOSCO. Mauritius, Cyprus and British Virgin Islands, all have signed MoUs with IOSCO.

Set up in 1983, IOSCO has 109 ordinary members, 11 associate members and 63 affiliate members. SEBI is an associate member while the Forwards Markets Commission of Mauritius is an ordinary member of IOSCO.