FIIs and their agents have been allowed to issue ODIs such as participatory notes against underlying securities to those entities who are not registered with Sebi. "The circular regarding the undertaking is nothing new as Sebi just wants to track how much money is coming from FIIs and from Indian investors separately. It is basically tightening of the norms of disclosure," said D K Aggarwal, director of a domestics brokerage SMC Global.
Now, he noted, it will be binding on the FIIs to disclose their offshore derivatives investment to the NRIs. NRIs are allowed to invest in the offshore derivatives directly, and they need not come through FII route, he added. The matter of undertaking by FIIs that they are not issuing ODI to NRIs or resident Indians came into limelight after Securities Appellate Tribunal recently ruled against the Sebi order in the Goldman Sachs' case.
In the Goldman Sachs case, SAT reversed the Sebi order that imposed a penalty of Rs one crore on a Mauritius-based arm of the investment banker for not submitting the information about issuance of ODI in a prescribed format with requisite declarations.