- Participatory notes are like contract notes. These are issued by FIIs to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI.
- The SEBI rule, however, says that P-Notes can be issued only to regulated entities (in any country).
- FIIs are not allowed to issue P-Notes to Indian nationals, persons of Indian origin or overseas corporate bodies (which are majority owned or controlled by NRIs).
- This is done to ensure that the P-Note route is not used for money laundering purposes.
- FIIs are required to report to the SEBI on a monthly basis if they issue, renew, cancel, or redeem P-Notes. The SEBI also seeks some quarterly reports about investing in P-Notes.
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