What is the Difference Between FII and QFI?
🆚 Go to Comparative Table 🆚The main difference between Foreign Institutional Investors (FII) and Qualified Foreign Investors (QFI) lies in the type of investor they represent and the specific investment instruments they are allowed to invest in.
FII refers to investments made by institutional investors in a foreign market, usually the stock market of another country. To invest as an FII, the investor must open a sub-account with an FII, which is then used to invest in the foreign market. FIIs must ensure they are compliant with all the rules laid out by the country they are investing in and abide by the limits and securities they are allowed to invest in.
QFI stands for Qualified Foreign Investor, and it can be an individual, group, or association. QFIs can directly invest in a foreign market without the need to open a sub-account with an FII. To invest as a QFI, the investor must open a demat account and a trade account with a depository participant in the country they are investing in. QFIs must be residents in a foreign country that adheres to anti-money laundering and anti-terrorist standards. Additionally, the investment as a QFI does not require individuals to be of high net worth as in FIIs, allowing any investor, big or small, to make foreign investments as a QFI.
In summary, FIIs represent institutional investors, while QFIs represent individual or group investors. FIIs require opening a sub-account with an FII to invest in a foreign market, while QFIs can directly invest without the need for a sub-account. QFIs also have fewer restrictions on net worth compared to FIIs.
Comparative Table: FII vs QFI
FII (Foreign Institutional Investor) and QFI (Qualified Foreign Investor) are two types of foreign investment classifications that were introduced to facilitate international investments in a country's share market. Here is a table comparing the differences between FII and QFI:
| Feature | FII (Foreign Institutional Investor) | QFI (Qualified Foreign Investor) |
|---|---|---|
| Definition | FII refers to an investment firm or fund that is not located in or registered in the country where the investment is made. Examples include mutual funds, hedge funds, insurance firms, pension funds, and financial institutions. | QFI is an individual, firm, or fund that is located outside of the country in which the investment is made. |
| Sub-account | FIIs must open a sub-account with a designated bank in the country where the investment is made. | QFIs are not required to maintain a sub-account. |
| Registration | FIIs must register with the appropriate regulatory body, such as the SEBI (Securities and Exchange Board of India). | QFIs are not required to register with the regulatory body. |
| Investment Options | FIIs can invest in capital instruments like stocks, bonds, ADR, GDR, and mutual funds. | QFIs can invest in specified instruments by opening a Demat account in a SEBI-approved Qualified Depository Participant. |
| Residency Requirements | FIIs are institutional investors, and their residency is not specified. | QFIs must be residents of a foreign country that is compliant with the standards of the Financial Action Task Force (FATF) and signatory to the International Organization of Securities Commission's (MMOU). |
In summary, the main differences between FII and QFI are the requirement of a sub-account, registration with the regulatory body, and the type of investor they represent (institutional investors for FIIs and individual or entity investors for QFIs).