Explanation:

Participatory Notes are Offshore Derivative Instruments (ODIs) issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly.

• P-notes have Indian stocks as their underlying assets.
• Though P-note holders have less stringent registration requirements, they have to go through a proper due diligence process of the Securities and Exchange Board of India (SEBI).
• SEBI was established in 1992 in accordance with the provisions of the SEBI Act, 1992.
• Its functions include protecting the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.

Hence option 3rd is correct.