Ahead of the 32nd annual conference of the IOSCO or International Organisation of Securities Commissions, where regulators across the world participate, debate & discuss key regulatory issues, Sebi Chairman, M Damodaran gives his views on issues like P-notes, real-estate IPOs and stock lending mechanism.

Damodaran comments that there is no reason to disbelieve any FII disclosure on P-Notes and there will be always a tendency to come in via P-Notes.

He adds that there are statements in real-estate IPOs that lacks clarity and they have sought clarity on land bank disclosure for realty IPOs.

The SEBI Board has approved stock-lending mechanism and the structures for stock lending and short selling are in place.  

Excerpts from CNBC-TV18's exclusive interview with Sebi Chairman, M Damodaran:

Q: What are your views on P-Notes?

A: I think it's necessary to understand the nature of the instrument. These are offshore derivative instruments issued outside India by registered FIIs to investors outside India. What you can do is, with whoever you have a privity of contract of relationship, which your registered FIIs are asked to give as an undertaking, so that they know who the holders of the Participatory notes are, the FIIs in terms of the FII regulations do it month after month. We have no reason to disbelieve every such statement that is made.

Should evidence come to our notice that there is something that we need to look at, clearly we will ask questions. We will want to know the names of the holders, we would want to know whether these are entities that cause regulatory concern because the basic principle of regulation in such a situation is whether the home country regulator is satisfied with that entity. So are these entities that are registered, as they are regulated in their home jurisdictions. These are some of the issues that get raised continuously.

We, in any event, recognise that as long as the India growth story is good, as long as some people cannot access our markets directly - given who they are, the nature of institutions that they are, there will always be tendency for people to come in via the Participatory note route.

There are also people who will tend to use this route because of the cost associated with setting up a research unit, back office, etc for direct investment. This is an issue that we are looking at continuously to see how to facilitate more people coming into our markets directly and at the same time, seeing that the ODI is a less attractive option.

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