- P-Notes, also known as Offshore Derivative Instruments (ODIs), are financial instruments used by foreign investors to invest in the Indian stock market without undergoing the stringent registration process with the SEBI.
Origins and Purpose:
- P-Notes were introduced to facilitate easier access to Indian markets for foreign investors who were unwilling or unable to meet the regulatory requirements of direct investment.
- These instruments were initially introduced in the early 1990s to attract foreign investment and enhance liquidity in Indian capital markets.
Mechanism:
- Foreign investors, including individuals and institutions, invest in Indian securities indirectly through registered Foreign Institutional Investors (FIIs) or their sub-accounts.
- FIIs issue P-Notes to these investors against their investments, allowing them to participate in Indian markets without directly registering with SEBI.
- P-Notes are derivative instruments issued by FIIs backed by Indian securities.
Securities and Exchange Board of India (SEBI)
- Before the establishment of SEBI, the regulatory authority overseeing capital issues was the Controller of Capital Issues, operating under the Capital Issues (Control) Act of 1947.
- In 1988, the Securities and Exchange Board of India (SEBI) was formed as the regulatory body for capital markets in India through a government resolution.
- However, it gained autonomy and statutory authority by enacting the SEBI Act 1992.
- SEBI’s headquarters is based in Mumbai, with regional offices in Ahmedabad, Kolkata, Chennai, and Delhi.
- Structure:
- The structure of SEBI comprises a Board headed by a chairman along with several other members, both full-time and part-time.
- SEBI has the authority to appoint committees as needed to address relevant issues of the time.
- Additionally, a Securities Appellate Tribunal (SAT) has been established to safeguard the interests of entities dissatisfied with SEBI’s decisions.
- SAT comprises a Presiding Officer and two other Members and is vested with powers similar to those of a civil court.
- Furthermore, individuals who disagree with SAT’s decisions or orders can appeal to the Supreme Court.
