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Market regulator Security Exchange Board of India recently notified new rules for foreign investments through financial instruments such as participatory notes, asking FIIs to wind up P-Notes for investing in derivatives within 18 months.SEBI also commanding curbs on P-Notes for investing in spot market.In derivatives, foreign institutional investors (FIIs) and their sub-accounts cannot issue fresh P-Notes and will have to conclude their current position in 18 months. In spot market, FIIs will not be permitted to issue P-Notes more than 40 % of their assets under custody. The reference date for manipulative such assets will be September 30.
Those FIIs who have issued P-Notes of more than 40 % of their assets could concern such instruments only if they cancel, redeem, or close their existing PNs. Those FIIs who have issued P-Notes less than 40 % of their assets under safekeeping can issue additional instruments at the rate of 5 per cent of their assets.