Stock market supervisory body Securities and Exchange Board of India
(SEBI) has introduced rules for raising the foreign fund inflows in the
Indian securities markets.

SEBI, on Thursday, has formalized a ban on sub-accounts of foreign
institutional investors (FIIs) from issuing participatory notes (PNs).
Foreign investors make use of the accounts registered in states
including Mauritius or the Cayman Islands to trade shares for their
customers.

These called sub-accounts, issue participatory notes to the
customers as purchasing proof, therefore permitting them to remain
unspecified. SEBI has granted 18 months time period to the foreign
funds to end such trades.

But, SEBI does not end up P-notes completely.

The foreign funds that are already registered can issue around 40
percent of their overall investment in Indian bourses via instrument.
However, it is also important that the amount of their total
investments would be based on their total asset value as of September
30, 2007.

Additionally, foreign funds who deal on their own or company
sub-accounts can change from sub-account rank to completely registered.

SEBI has also paved the method for new set of foreign investors
(FIs). Now, there will be a separate category for registering pension
funds, foundations, endowment funds, university funds and charitable
trusts.

The regulator left unclear whether fund houses based in other
countries would be subject to the regulations of their home countries
or the country they use as a channel to invest here.