CandleFocus Glossary Editor
Participatory Notes (P-notes), commonly referred to as PNs, is a derivative instrument derived from Indian assets and provides a viable means of investing in the Indian Financial Market by foreign institutional investors (FIIs). This notes enable non-registered investors to partake in the Indian market indirectly.
P-notes are bearer instruments, a type of debt security, meaning the holder of the instrument is entitled to its benefits. The holder of PN is not required to be registered with the Securities and Exchange Board of India (SEBI) as the issuer is registered with the overseas authority and could be a FII or broker.
Participatory notes are attractive to investors since these investments are treated as an indirect foreign investment where the identity of the investor remains anonymous. As well, these notes provide an investor with a ready access to India's capital markets with the help of professional FIIs or brokers acting as an Intermediary or foreign portfolio investor (FPI).
Moreover, investments in Participatory notes are allowed for investments to be placed in both the Debt & Equity share market. The issuance of participatory notes also allows the FPI to select their desired instruments through their qualified and well-trained money managers.
These notes have helped India to retain its competitive edge over other Asian countries and improve foreign investments in India. Hence, Participatory notes have gained considerable attractiveness in India’s capital market.
However, the SEBI board has issued certain regulations governing Participatory notes which needs to be followed both FIIs & Others. It requires these notes to be issued and settled using SWIFT codes and the issuer should closely monitor and evaluate the beneficiaries for anti-money laundering or terrorist activities. Investors should bear the mandated KYC requirements within the structure of Participatory Notes & other related transactions.
In conclusion, Participatory notes provide an easy & efficient way of investing in the Indian capital Market while remaining anonymous. Despite certain regulations being imposed on its use, PN’s are still a significantly strong instrument in the equity & debt market.
P-notes are bearer instruments, a type of debt security, meaning the holder of the instrument is entitled to its benefits. The holder of PN is not required to be registered with the Securities and Exchange Board of India (SEBI) as the issuer is registered with the overseas authority and could be a FII or broker.
Participatory notes are attractive to investors since these investments are treated as an indirect foreign investment where the identity of the investor remains anonymous. As well, these notes provide an investor with a ready access to India's capital markets with the help of professional FIIs or brokers acting as an Intermediary or foreign portfolio investor (FPI).
Moreover, investments in Participatory notes are allowed for investments to be placed in both the Debt & Equity share market. The issuance of participatory notes also allows the FPI to select their desired instruments through their qualified and well-trained money managers.
These notes have helped India to retain its competitive edge over other Asian countries and improve foreign investments in India. Hence, Participatory notes have gained considerable attractiveness in India’s capital market.
However, the SEBI board has issued certain regulations governing Participatory notes which needs to be followed both FIIs & Others. It requires these notes to be issued and settled using SWIFT codes and the issuer should closely monitor and evaluate the beneficiaries for anti-money laundering or terrorist activities. Investors should bear the mandated KYC requirements within the structure of Participatory Notes & other related transactions.
In conclusion, Participatory notes provide an easy & efficient way of investing in the Indian capital Market while remaining anonymous. Despite certain regulations being imposed on its use, PN’s are still a significantly strong instrument in the equity & debt market.