Foreign Institutional Investor

The term foreign institutional investor is applied to refer to an investor, most of the times in the form of an entity or institution, that makes an investment in the capital markets of a nation other than the original location of the entity or institution.

Often FII or foreign institutional investment is termed as hot money due to the cause that it may go out of the country at a similar pace at which it entered the country.

In a number of nations such as India, statutory authorities such as SEBI or Securities and Exchange Board of India have delineated the established rules and regulations for the purpose of registration of Foreign Institutional Investors and also for the purpose of regulating various types of investments coming in with the help of FIIs.

The rules and regulations regarding FEMA or Foreign Exchange Management Act involves the sustainment of bonds with high credit ratings in the form of securities or pledges with stock exchanges.

Examples of foreign institutional investors are insurance companies, hedge fund institutions, mutual fund companies and pension fund institutions.

The term FII or foreign institutional investor is mostly prevalent in India for citing overseas companies that are making investments in the Indian financial markets. For participating in the Indian financial market, it is mandatory for the FIIs to register with the Securities and Exchange Board of India.

One of the principal market norms related to the Foreign Institutional Investors includes fixing restrictions on the ownership of Indian companies by FIIs or Foreign Institutional Investors.