Stricter KYC and Disclosure Norms Issues by SEBI for P-Notes


Securities and Exchange Board of India (SEBI) the markets regulator has relived the stricter KYC (Know Your Customer) norms and disclosure regime for Participatory Notes (P-Notes). Registered foreign institutional investors (FII) has released are offshore/overseas derivative instruments (ODIs) a P-Notes to overseas investors.

  • With this implementation they made easier and cost-effective way for foreign investors to invest in Indian markets without directly registering as Foreign Portfolio Investors (FPIs).

Key facts

  • The main purpose of SEBI’s stricter KYC and disclosure norms is to mark it tougher to use these offshore instruments that do not reveal the money-trail and specifics of their users.
  • All the users of P-Notes would have to survey Indian KYC and Anti Money Laundering (ALM) Regulations, nonetheless of their jurisdictions according to the new norms.
  • P-Note users have to file suspicious transaction reports with the Indian Financial Intelligence Unit in this regard.
  • ODI receptacles have to clatter monthly reports on ODIs all the midway transfers through the month.
  • ODI issuers also have to carry reconfirmation of the ODI positions on a semi-annual basis.


  • After taking into account suggestions the measure was issued from Special Investigation Team (SIT) on black money to confirm this route is not used for money filtering.
  • ODIs have often been in controversy in India for alleged misuse for round-tripping of funds in the recent time.
  • However since the SEBI made inflexible norms in the fresh years, they have also developed less attractive.
  • Earlier in 2007, ODIs are used to account higher then 55 % of the total foreign fund currents in Indian capital markets, now their share has dropped to a record low level of 9.3%.

- Published/Last Modified on: June 14, 2016