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TMI Blog2015 (10) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... struments known as 'participatory notes' which are nothing but 'offshore derivative instruments' (ODIs). The other aspect is with regard to the press report which appeared in 'THE HINDU', New Delhi Edition on July 27, 2015 with regard to the alleged statement made by the Finance Minister. 2. The entire petition is based on the premise that a participatory note is an illegal instrument and is prohibited under the Prevention of Money Laundering Act, 2002, Foreign Exchange Management Act, 1999 and the SEBI Rules and Regulations. This is clearly stated in paragraph 3 of the writ petition. 3. Mr Sanjay Jain, the learned Additional Solicitor General of India, has placed before us the Securities and Exchange Board of India (F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a country whose securities market regulator is a signatory to International Organization of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the Board; (c) the applicant being a bank, is a resident of a country whose central bank is a member of Bank for International Settlements; (d) the applicant is not resident in a country identified in the public statement of Financial Action Task Force as: (i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d" shall mean a bilateral Memorandum of Understanding between the Board and the overseas regulator that, inter alia, provides for information sharing arrangements under clause (ib) of sub section (2) of Section 11 of the Act." 5. Foreign portfolio investors have been categorized into three separate categories in terms of Regulation 5 of the said Regulations. We need not go into that aspect of the matter. It is, however, pertinent to note Regulation 22 of the said Regulations, which prescribes the conditions for issuance of offshore derivative instruments (ODIs), of which, a participatory note is an example. Regulation 22 of the said Regulations reads as under:- "Conditions for issuance of offshore derivative instruments 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as and when and in such form as the Board may specify. (4) Any offshore derivative instruments issued under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 before commencement of these regulations shall be deemed to have been issued under the corresponding provision of these regulations." 6. It is important to note that Regulation 22 (2) clearly stipulates that a foreign portfolio investor has to ensure that the further issue or transfer of any offshore derivative instruments issued by or on its behalf, 'is made only to persons who are regulated by an appropriate foreign regulatory authority'. 7. Regulation 22 (3) is also important inasmuch as it clearly empowers the SEBI to require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court has suggested stricter norms for participatory notes. The Finance Minister has only stated that the Government would not take any 'knee-jerk' reaction with regard to stipulating or not stipulating any norms stricter than what are already in place under the said SEBI Regulations, 2014. This does not give the petitioner any cause for filing the present petition and seeking the multifarious reliefs that the petitioner has sought. The petition has no merit. Before we part with this case, it needs to be recorded that the personal allegations and innuendos made against the respondent No. 2 in paragraphs 2, 4 and 23 and/ or at any other place in the petition have been withdrawn by the petitioner-in-person. The writ petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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