Participatory Notes Essay Example for Free

Participatory Notes EssayParticipatory Notes commonly know as P-Notes or PNs argon instruments issued by learned foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India SEBI.SEBI permitted foreign institutional investors to register and participate in the Indian stock market in 1992.Investing through P-Notes is very simple and hence very popular amongst foreign institutional investors.Contents1 Working2 Need3 Participatory Notes Crisis of 20074 Trends in PN5 ReferencesWorkingParticipatory notes atomic number 18 instruments used for qualification investments in the stock markets. However, they are not used within the country. They are used outside India for making investments in shares listed in that country. That is why they are in like manner called offshore derivative instruments.In the Indian context, foreign institution al investors (FIIs) and their sub-accounts mostly use these instruments for facilitating the participation of their overseas clients, who are not interested in dynamic directly in the Indian stock market.For example, Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.NeedAnonymity Any entity investing in participatory notes is not required to register with SEBI (Securities and Exchange Board of India), whereas all FIIs have to compulsorily get registered. It enables large hedge funds to carry out their operations without disclosing their identity. Ease of Trading Trading through participatory notes is easy because participatory notes are like contract notes transferable by endorsement and delivery. Tax Saving Some of the entities route their investment through participatory notes to retort advantage of the tax income laws of cert ain preferred countries. Money Laundering PNs are becoming a favourite with a host of Indian money launderers who use them to first take funds out of country through hawala and then get it back using PNs.