SEBI Bans FPIs from Issuing P-Notes with Derivatives as Underlying

The Securities and Exchange Board of India has imposed new restrictions on foreign portfolio investors (FPIs), barring them from issuing participatory notes (P-notes) with derivatives as the underlying asset.

SEBI Tightens FPI Regulations

In a move to tighten regulatory oversight, the Securities and Exchange Board of India announced on Tuesday that foreign portfolio investors (FPIs) are now prohibited from issuing offshore derivative instruments (ODIs), also known as participatory notes (P-notes), with derivatives as the underlying asset.

SEBI Enhances Transparency in ODIs

The regulator also issued a directive requiring FPIs that currently issue such ODIs to gather ownership details of all investors holding these instruments. SEBI clarified that ODIs with derivatives as underlying or reference, which are already in circulation, can be redeemed within one year of the circular’s issue. However, no renewals of such ODIs will be permitted.

P-notes are financial instruments that allow foreign investors to trade in Indian stocks without direct registration with SEBI, acting as a bridge for overseas investments into Indian markets. SEBI’s latest move aims to further regulate foreign capital flows and enhance transparency in Indian financial markets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.