SEBI PRUNES P-NOTES
Participatory notes (P-notes) are
securities linked to equities used
by investors who cannot trade
directly in the Indian market.
Securities and Exchange Board
of India (SEBI) has suggested
restricting their use to curb
burgeoning capital flows into
the country. Accordingly,
- FIIs and sub-accounts to wind up P-notes for investing in derivatives within 18 months.
- FIIs will not be allowed to issue P-notes in the spot market for more than 40% of their assets under custody.
- Those FIIs that have issued P-Notes less than 40% of their assets under custody, can issue additional instruments at the annual rate of 5% of their assets.
- The reference date for calculating such assets will be September 30.
- The registration procedure is being simplified; FII registration to be in perpetuity.
- Separate category of unregulated investors, such as pension funds and charitable trusts, to be allowed.
- Fresh look at FII regulations.
Institutional investors that
have applied to register sub accounts
can continue trading
while their application is being
processed. Foreign investors
currently registered in India
will not be allowed to issue
new derivatives from sub accounts
based in tax havens
such as Mauritius.
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