Press Trust of India
Mumbai, May 29: Allaying concerns about any further misuse of Participatory Notes, market watchdog Sebi’s Chairman UK Sinha has said Indians can no longer use these offshore instruments, even indirectly, and a strong safety net has been put in place to check any routing of black money. He also said that foreign investors have been taken “completely on board” for changes in the regulations governing Offshore Derivative Instruments (ODIs) — commonly known as P-Notes — and they have been consulted even for design of the reporting formats about investments through this route.
Sebi will soon finalise reporting formats as also the revised guidelines and new circulars, for Foreign Portfolio Investors (FPIs) dealing in ODIs, after incorporating the changes approved by its board earlier this month. While foreign investors can register themselves as FPIs to invest directly in India, ODIs are typically market-access instruments preferred by those looking to save on time and operational costs involved with a direct registration. Sebi rules allow certain classes of FPIs to issue ODIs after a proper due-diligence process that has been further tightened now to address the concerns raised by the Special Investigation Team (SIT) on Black Money. In an interaction here, the Sebi Chairman said India wants to encourage and promote long-term investments and would prefer foreign investors to come directly, but there will be no roadblocks for genuine investments even through PNs.
Ruling out any special concession for the investors using this route, including for hedge funds, Sinha said if some investors have a genuine reason such as ‘testing the Indian waters’ they can use ODIs after complying with the due KYC and other regulatory requirements. “In the past, this route was misused by some Indian nationals and Indian corporates for getting their ill-gotten money rerouted to the Indian markets.
