Sebi to discuss measures to check black money in deeper markets

The Sebi board will meet on Wednesday to discuss stricter norms to check any flow of black money into the stock market through controversy-ridden P-Notes as well as initiate steps to allow mutual fund investments via e-wallets.

The markets regulator will also consider new norms for allowing options trading in commodity derivatives market, sources said.

Besides, rules are likely to be relaxed for registration of foreign investors and for common license to brokers to deal in equities and commodities.

The Sebi board will be meeting in Mumbai tomorrow, its first meeting under the chairmanship of Ajay Tyagi who took charge of the Securities and Exchange Board of India (Sebi) on March 1.

Among a slew of reform measures, the Sebi board will also consider making it easier for banks and financial institutions to get shares of the companies they have exposure to by way of conversion of loan into equity -- a move seen as a major boost to the steps for handling the bad loan menace.

The Sebi board will also take stock of long-pending investigations and cases, involving some big corporates, and will consider putting in place an internal guidance note for dealing with quasi-judicial matters.

Besides, it would also discuss the implementation of graded surveillance measures by the stock exchanges to check any manipulation of share price.

The regulator is also looking to allow investors to buy mutual funds worth up to Rs 50,000 through digital wallets to make it easier for investors to purchase these instruments, especially the youth.

In the run up to his first meeting as Chairman, Tyagi has been meeting various groups of stakeholders in the capital markets and some of these interactions are scheduled even tomorrow, through which he is looking to get a first-hand understanding of the issues faced in the marketplace and the expectations from the regulator.

In one of the major areas of importance, Sebi will consider new guidelines for dealing with offshore derivative instruments, commonly known as participatory notes (P-Notes), which have been long seen as being possibly misused for routing of black money from abroad.

While Sebi has tightened its norms repeatedly over the recent years to check any loophole, the government now wants the regulator to explicitly impose restrictions on resident Indians and NRIs from being 'beneficiary owners' of these instruments.

While Sebi has already put in place a mechanism for such restrictions, there was a view that the existing restriction are only in form of 'FAQs' of the norms and therefore the Finance Ministry has asked the regulator to impose this restriction through an amendment to the FPI (Foreign Portfolio Investment) Regulations in order to give greater legal sanctity.

Following Sebi's measures to check any misuse of P-Notes, the notional value of these instruments has declined over the years from 55.7 per cent of overall FPI investments in June 2007 to just 6.7 per cent in December 2016.

In recent months, the P-Note investments have fallen further, though there was a surprise uptick in the month of March -- presumably due to it being the last month for availing of certain tax benefits for investments coming through some major offshore investment gateways.

There are also fears that P-Note investments may start coming from other jurisdictions like the US, France and the Netherlands after tightening of rules for inflows from countries like Mauritius, Singapore and Cyprus.