India: Sebi can kill money laundering by making participatory notes dearer

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June 4 2017

Sebi’s move to propose tighter rules for participatory notes (P-notes) to enhance transparency with regard to the identity of those investing in Indian stocks makes sense.

The new rules include levying a regulatory fee on issuers of P-notes — offshore derivative instruments (ODIs) that allow investors to bet on India without registration — and prohibiting these instruments from being issued against derivatives for speculation. Concerns that P-notes could be a possible conduit for illegal funds in the capital market aren’t misplaced.