The Securities and Exchange Board of India on Friday said that Qualified Foreign Investors (QFIs) should not issue offshore derivatives instruments / participatory notes (PNs). A declaration and undertaking to this effect would be obtained by Depository Participants from the QFIs.
The SEBI also stipulated that the total shareholding held by a QFI in Indian equities should not exceed 5 per cent of the paid-up capital of the company at any point of time.
The market regulator also asked depositories to ensure that “aggregate shareholding of all QFIs shall not exceed 10 per cent of the paid-up capital of the company at any point of time, in respect of each equity share class having separate and distinct ISIN (International Securities Identification Number).”
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Foreign investors who met the prescribed Know Your Customer (KYC) requirements could invest in equity shares listed on the recognised stock exchanges and in equity shares offered to public in India. In order to enable this, they would hold equity shares in a demat account opened with a Depository Participant (DP).
“The QFI would be allowed to transact in Indian equity shares only on the basis of taking and giving delivery of shares purchased or sold. Each transaction by QFI shall be cleared and settled on gross basis,” the regulator said.
The stock exchanges would provide the details of paid-up equity capital of all the listed companies, ISIN-wise, to the depositories once in six months periodically and also provide information regarding change in paid-up capital in any listed company immediately.
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The SEBI asked stock exchanges to amend Clause 35 of the listing agreement on or before June 30, 2012, so as to incorporate another class of investor to disseminate QFI shareholding in equity shares.
“If, for any reasons, the QFI is not able to purchase equity shares within five working days of the inward remittance, the DP shall immediately remit the money back to the designated overseas bank account of the QFI.”
In case of QFI participation in public issues, the QFI would provide instruction to the DP to make application for public issue.
In case of dividend received on account of QFI, the DP shall remit the same to the designated bank overseas account of the QFI within five working days (including the date of credit to the single rupee pool account) from the date of receipt of money in the DP's rupee pooled bank account, unless any fresh purchase of equity shares is made out of such dividend receipts In case of QFI participation in corporate actions such as buy back and delisting wherein the pool account maintained with DP is credited with funds, such funds shall be remitted back to the designated bank's overseas account of the QFI within five days of receipt of same, unless any fresh purchase of equity shares is made out of such funds.
The transactions of QFIs, for all purposes, shall be treated on a par with that of Indian non-institutional investors.
SEBI said that the DP shall open a separate single rupee pool bank account with a designated AD Category-1 bank, exclusively for the purpose of investments by the QFI in equity shares in India.