Sebi may allow FIIs to register for good

Once the noise around participatory notes gets over, Securities and Exchange Board of India...

Once the noise around participatory notes (PNs) gets over, Securities and Exchange Board of India (Sebi) will make another feel-good announcement: registration of foreign institutional investors (FIIs) with the regulator will be for good — they won’t have to renew it. According to a senior Sebi official, “Registration of FIIs will be till perpetuity, unless, of course, we have a reason to revisit them.” As of now, FIIs can be registered for three years, after which they have to renew the registration.

“We were going to announce this along with the PN restriction announcement but didn’t want to mix up issues,” he said. This announcement will follow or come concurrently with the final guidelines for PNs. The decision would provide direct relief to the 20 sub-accounts — foreign companies, individuals, institutions, funds or portfolios established outside India on whose behalf investments are made here by FIIs — issuing PNs that have sought the FII status within the 24-hour deadline set by Sebi on Monday; more should follow.

“For us this whole issue about registering players is a good move, it will clear the market and bring in transparency,” said the head of a large foreign private equity fund that currently invests in the securities market through the PN route but plans to register itself as an FII shortly. “Non renewal of registration by FIIs will send one more positive signal to the global investor community.”

According to market players, more than money — both registration and renewal cost $10,000 — it is the speed of clearing FII proposals by Sebi that is vexatious, something the regulator is aware of. “We are planning to speed up the process of registration,” the Sebi official said. Though technically it should take seven working days to get an FII registration, the reality is not so. “This will change.”

But often, it is not because of Sebi that delays occur but because applications are incomplete. “Not all foreign investors are comfortable with disclosures,” said the foreign investor. “As a result, when incomplete information is filed, Sebi has no option but to send it back and hence the delays.”