FIIs raising money from single source barred from trading

By SiliconIndia   |   Thursday, September 30, 2010   |    1 Comments
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Mumbai: Foreign institutional investors (FIIs), who cannot certify that the money they manage has been raised from several offshore investors, will be barred from getting into new trades in the Indian stock market from Friday. Securities and Exchange Board of India (SEBI), which would reveal the list of non-compliant entities on its website, said that no-compliant and sub-accounts could either retain their current positions or sell off or unwind. The investment by FIIs on Indian stocks has touched $18 billion (Rs. 81,880 crore) so far this year, the highest ever in a single year. SEBI had told FIIs and their sub-accounts in April this year to give an undertaking that they are not multi-class share entities or a protected cell company, which allows distinct pools of investments. The investors putting money in various pools, which are referred to as cells by market participants, can have different fund managers pursuing different investment strategies. The fear was that while the umbrella firm gets registered as an FII or a sub-account, the regulator may have no control over the different pools or cells under the firm. And, once a multi-class share entity gets registration, it can go on adding new cells. Hundreds of foreign fund managers have been knocking on the doors of the regulator for more time to fall in line with new rules. SEBI, which felt that PCCs and multi-class structures not only went against the spirit of FII regulations, but had ways to side-step rules and came out with the new directions, giving foreign investors a six-month deadline to comply.
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