New P-Note Norms Seek to Curb Illegal Funds Inflow

Published: 26th November 2014 06:00 AM  |   Last Updated: 25th November 2014 10:57 PM   |  A+A-

MUMBAI: The Securities and Exchange Board of India (SEBI) has tightened rules governing issuance of offshore derivative instruments (ODI), popularly referred to as participatory notes (P-Notes), with immediate effect. The move is seen by experts as an attempt to ensure legitimate money flowing into the country.

In a circular issued late on November 24, SEBI said foreign portfolio investors shall issue ODIs only to those investors who are residents of a country whose securities market regulator is a signatory to International Organization of Securities Commission’s (IOSCO) multilateral memorandum of understanding or a signatory to bilateral memorandum of understanding with SEBI.

Else, the applicant should be a bank, registered in a country whose central bank is a member of Bank for International Settlements, and the applicant should not be from a country that has been declared to have deficiencies in anti-money laundering or combating the financing of terrorism, and has not addressed these deficiencies.

“Where an investor has investments as foreign portfolio investor and also holds positions as an ODI subscriber, these investment restrictions shall apply on the aggregate of FPI investments and ODI positions held in the underlying Indian company,’’ SEBI said in its statement.

“Investment as FPI and positions held as ODI subscriber will be clubbed together with reference to the said investment restrictions.’’

Until now, even unregulated overseas funds were allowed to subscribe to the Participatory Notes as long as the fund manager was regulated. Basically, the new norms will enhance KYC and shut out entities form opaque and non-transparent structure to filter the kind of money that flows into the country.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp