Consider the following statements about Participatory notes or P Notes and identify the correct one ...........

Economic Affairs Financial Markets

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Consider the following statements about Participatory notes or P-Notes and identify the correct one/s

1. P-Notes are Overseas Derivative instruments used to invest by foreign investors in Indian Markets.

2. An investor investing through P-notes need not fulfill KYC norms.

3. P-notes have been kept non-transferrable in nature to prevent money laundering.

Select the correct answer using codes given below

1 only

1 and 2 only

3 only

1 and 3 only

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Explanation:

- Statement 1: Correct. Participatory Notes (P-Notes) are instruments used by foreign investors to invest in Indian stock markets without registering directly with the Securities and Exchange Board of India (SEBI).

- Statement 2: Incorrect. Investors using P-notes are still subject to Know Your Customer (KYC) norms, as regulatory bodies like SEBI have increased scrutiny and monitoring to ensure compliance and transparency.

- Statement 3: Incorrect. P-notes can generally be transferred between parties, which has raised concerns about their potential misuse for money laundering. However, regulatory efforts aim to monitor and control such activities without making them outright non-transferable.

Correct Answer: Option 1 - 1 only