With reference to Participatory Notes PN consider the following statements 1 nbs...........

Economic Affairs Foreign Investment

With reference to Participatory Notes (PN), consider the following statements:

1. These are financial instruments used by investors that are not registered with the SEBI to invest in Indian securities.

2. The investors enjoy the voting rights in relation to shares invested through the PN.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

The investor in PN does not own the underlying Indian security, which is held by the FII who issues the PN. Thus the investors in PNs derive the economic benefits of investing in the security without actually holding it. They benefit from fluctuations in the price of the underlying security since the value of the PN is linked with the value of the underlying Indian security. The PN holder also does not enjoy any voting rights in relation to security/shares reference

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