The SEBI board approved changes to the regulations to permit FIIs investing through the 100 per cent debt route to invest in unlisted securities. This the finance minister had announced in his budget speech for 1998-99.

According to SEBI FII regulations 1995 FIIs can enter secondary market transactions only through stock brokers registered with SEBI. This is also a condition of the Fera approval granted to FIIs by the Reserve Bank of India. These provisions preclude an FII from tendering their shares in an open offer made in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. To facilitate the participation of FIIs in open offers the board approvedamendments to the SEBI (Foreign Institutional Investors) regulations, 1995 permitting FIIs to tender their securities directly in response to an open offer made in terms of SEBI (Substantial Acquisition of Shares and Takeovers) regulations, 1997.

The board also approved the simplification of the process of approval for sub-accounts for whom they are seeking registration. Further, no documents beyond the application and undertaking would be required to submitted. In conjunction with the simplified registration procedure, a US $ 1,000 registration fee for sub-accounts would now be charged. This fee would now be paid at the time of application itself.

As FIIs are potentially active participants in the derivatives markets the SEBI board felt that the presence of FIIs and domestic institutions would be critical to the success of the market. The SEBI board approved amendments to the regulations to permit FIIs to buy and sell derivative contracts which are traded on a stock exchange. FIIs will also be permittedto trade in derivatives without requiring them to take and give delivery.