SEBI tightens P-Notes norms to check money laundering

Market regulator Securities and Exchange Board of India (SEBI) on 20 May 2016 tightened the norms for investing in Participatory Notes (P-Notes). The norms have been tightened with a view to check money laundering.

As per the norms

• It has been mandatory for P-Notes users to follow the provisions of the Prevention of Money Laundering Act, 2002.

• They have also been mandated to report any suspicious transactions immediately.

• Sebi also tightened the due-diligence requirements for issuance and transfer of these instruments

• It also put the onus on the original issuer for compliance to Anti-Money Laundering Regulations.

• The issuers would have to conduct periodic review and report the complete transfer trail of P-Notes to Sebi on a monthly basis in addition to the present requirement of reporting details of their holders.

These norms were passed upon recommendations of the Supreme Court- appointed SIT on black money.

SIT on black money was set up under apex court’s order of 4 July 2011. It was set up under former apex court judges Justice MB Shah as its chairman and Justice Arijit Pasayat as its vice chairman.

What are P-Notes?

P-Notes 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.

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