Steps taken sufficient are enough to address P-note concerns: Sebi

Sebi today said steps taken by it on P-notes are “sufficient enough” to address the concerns of SIT on black money, but the regulator is open to further suggestions, even as it asserted that consistent tightening of norms have made these instruments less attractive. “The consistent tightening of Offshore Derivative Instrument (ODI) norms by Sebi has not only been through increased compliances but also improved transparency,” the regulator said after its board meeting where the issue was also discussed. Over the years, foreign portfolio investments through ODIs, popularly known as Participatory Notes (P-notes), has come down significantly.

The regulator said the simultaneous liberalisation in registration process of foreign portfolio investors has made the P-notes “less attractive vis-a-vis taking direct registration as FPI”. In view of the strict norms for issuance of ODIs, their notional value to the Assets under Custody (AUC) of foreign portfolio investments has declined from a high of 55.7 per cent in June 2007 to 6.7 per cent in December 2016. Speaking to reporters, Sebi Chairman U K Sinha said the regulator is in constant dialogue with SIT and will go by the advice of it.

“Our feeling is that the measures taken by Sebi with regard to ODIs are sufficient enough to satisfy the SIT. But, if they come out with something new, then Sebi will have to take that…,” Sinha, whose tenure is ending next month, said after the board meeting here. The Special Investigation Team (SIT) on black money, set up by the Supreme Court, had recommended a slew of measures including the need for Sebi to come up with stricter regulations on P-notes, which are often viewed as a route for channelising illicit funds. The board was informed about the various aspects of ODIs and steps taken by the regulator after September 2014.

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