Market regulator SEBI is out to demonstrate it means business. It is now verifying whether foreign institutional investors (FIIs) are adhering to the new norms on the issue of participatory notes (PNs). As part of the exercise, it has asked FIIs to furnish details relating to issuance of PNs over the last nine months.
The latest SEBI move is an attempt to make the markets safer and more transparent. The regulator had changed the regulatory norms for PNs last year in an attempt to bring in greater discipline in foreign institutional investments in local stock markets.
According to the new guidelines, in the derivatives market, FIIs and their sub-accounts cannot issue fresh PNs. In the spot market, FIIs will not be allowed to issue PNs aggregating to more than 40 per cent of their assets under custody.