Market regulator Sebi today said it will look into the suggestions of the Special Investigation Team (SIT) on black money to ensure sufficient checks are in place with respect to overseas investments via P-Notes route.
The Supreme Court-appointed panel had recently suggested the Securities and Exchange Board of India (Sebi) to put in place regulations to help identify individuals holding participatory notes or offshore derivative instruments (ODIs), and take other steps required to curb black money and tax evasion through the stock market route.
"We do not dismiss the concerns raised by SIT with regard to P-Notes but Sebi has been very proactive on such matters much before these concerns were raised and will continue to be so," Sebi whole-time member S Raman told reporters on the sidelines of an EPFO function.
"If we find there is something else we are required to do we will do that," he noted adding that there are "sufficient check and balances" in place already to check capital inflows by foreign investors into the domestic equities as well as curb black money and tax evasion through the stock market route.
Besides, he said that Sebi had information on the investors using the P-Note route. He, however, was quick to add that by-and-large the money flow into the capital market space was "clean".
P-Notes are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the domestic stock markets without registering themselves with the market regulator.
P-Notes make up 15-20 per cent of the total FII investment in the country since 2009, while it used to be much higher at 25-40 per cent in 2008. It was as high as over 50 per cent at the peak of stock market bull run in 2007.
The SIT on black money in its report on July 25 had suggested that Sebi should put in place an effective mechanism to monitor any unusual rise in stock prices and inform other agencies like CBDT and Financial Intelligence Unit (FIU) for necessary action.
The panel also suggested that the market regulator should find out beneficial ownership of Participatory Notes (PN), an instrument used by foreign investors to invest in India.
"It is clear that obtaining information on 'beneficial ownership' of P-notes is of crucial importance to prevent their misuse. Sebi needs to examine the issue... And come up with regulations where the 'final beneficial owner' of P notes/ODIs are known," the report said.
