A day after Sebi tightened norms for investment in capital market through P-notes, government today said the 37 issuers of the offshore instrument have been sensitised about the provisions and all of them are on board.
Tightening its norms to check misuse of P-Notes for laundering of black money, market regulator Sebi had yesterday made it mandatory for users of these controversy-ridden overseas derivative instruments to follow Indian anti-money laundering law and report any suspicious transactions immediately.
“All the P-Note issuers have been sensitised about the requirement. They are fully on board. There are about 37 P-Note issuers. Almost all of them are on board,” Economic Affairs Secretary Shaktikanta Das told reporters here.
Sebi, he said, has only asked that KYC should be as per India onshore KYC (Know Your Client) that is because the investment instrument emanates from many countries “where the KYC mechanism is pretty relaxed”.
P-Notes (Offshore Derivative Instruments-ODIs) account for only 10 per cent of assets under custody of FPIs now, compared to 56 per cent in 2007.
They are typically instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in Indian markets without registering themselves directly in India to save on time.
But, they still need to go through a proper due diligence process.
Acting upon recommendations of the Supreme Court-appointed Special Investigation Team on black money, Sebi also tightened the due-diligence requirements for issuance and transfer of these instruments and put the onus on the original issuer for compliance to Anti-Money Laundering Regulations.