Section 15 in Securities And Exchange Board Of India (Foreign Institutional Investors) Regulations, 1995
15. Investment restrictions.-
(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 [unlisted or] [Inserted by S.O. 702(E), dated 9.10.1996] listed or to be listed on a recognised stock exchange in India; and(b)[ units of schemes floated by a Collective Investment Scheme.] [Substituted by Not. F.No. LAD-NRO/GN/2008/10/126204, dated 22.5.2008 ](c)[ dated Government Securities;] [Inserted by S.O. 333(E), dated 20.4.1998](d)[ derivatives traded on a recognised stock exchange; [Inserted by G.S.R. 128(E), dated 13.2.2001](e)commercial paper;](f)[ security receipts;] [Inserted by G.S.R. 948(E), dated 26.6.2006](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.(1B)Nothing contained in sub-regulation (1A) shall be deemed to prejudice the applicability of any other law, regulation or guideline.] [Inserted by Not. F.No. LAD-NRO/GN/2008/10/126204, dated 22.5.2008](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.[Explanation:- [Inserted by S.O. 105(E), dated 12.2.1997 ] For the purposes of the provisos to this sub-regulation, the expression "debt securities" shall include dated Government securities, commercial paper, and treasury bills].Provided further that the conditions mentioned in sub-regulation (2) shall not apply to investiments made by foreign institutional investors in security receipts issued by securitisation companies or asset reconstruction companies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules made thereunder:Provided further that no foreign institutional investor shall invest in security receipts on behalf of its sub-account."[Provided further that a corporate or individual shall not be eligible to invest through the hundred per cent, debt route.] [Inserted by S.O. 180(E), dated 29.2.2000](3)In respect of investments in the secondary market, the following additional conditions shall apply:-(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: [Substituted by Not. F.No. 1/4C/GM/2007/31/12/2007]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:[Provided that transactions in government securities including treasury bills shall be carried out in a manner specified by the Reserve Bank of India]. [Inserted by S.O. 495(E), dated 10.7.1997][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] [Inserted by S.O. 545(E), dated 30.6.1998] [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] [Inserted by S.O. LAD/DOP/1446/2007, dated 30.12.2003](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.] [Substituted by No. SEBI/LAD/DOP/1446/2007, dated 8.1.2007][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 Securities and Exchange Board of India (Buy-back of Securities) Regulation, 1998] [Inserted by S.O. 263(E), dated 16.4.1999] [or to sale of Securities by a Foreign Institutional Investor in response to an office made by any promotor or acquirer in accordance with the Securities and Exchange of India (Delisting of Securities) Guidelines, 2003] [Inserted by S.O. 263(E), dated 16.4.1999][Provided further that nothing contained in Clause (c) shall apply to disinvestment of securities by the Foreign Institutional Investors in response to an offer by Indian Companies in accordance with the 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 29.7.2002 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)] [Inserted by S.O. 548(E), dated 14.5.2003][Provided further that nothing contained in Clause (c) shall apply to any bid for, or acquistion of, securities by a Foreign Institutional Investor in response to an offer for disinvestment of shares made by the Central Government or any State Governmeny.] [Inserted by F.No. SEBI/LAD/DOP/3349/004, dated 30.12.2003][Provided further that nothing contained in Clause (c) shall apply to purchase or sale of security receipts by a foreign institutional investor.] [Inserted by S.O. 948(E), dated 6.6.2006](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 [ten] [Inserted by S.O. 702(E), dated 9.10.1996] 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 [ten] [Inserted by S.O. 702(E), dated 9.10.1996] percent of the total issued capital of that company:[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.] [Inserted by S.O. 946(E), dated 20.10.2000][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.] [Inserted by S.O. 180(E), dated 29.2.2000](7)The investment by the Foreign Institutional Investor shall also be subject to Government of India Guidelines.(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.] [Substituted by Not. No. F. No. 1/LC/GM/2007/31/12/2007, dated 31.12.2007][Explanation- [Inserted by S.O. 948(E), dated 26.6.2006 ] 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.]
