The hide and seek between SEBI and the foreign investors isnt a game, post the UBS securities scam. The FII acts as a proxy for the foreign investors, and uses the participartory note route. Participatory note, or p-note as they are called, are derivative instruments that have shares as their underlying. This makes them as volatile as the stock market.
The requirement of SEBI for the FII to disclose information on the investors has not gone well with the Know Your Client requirement, which fails to give a clear description of the requirements.
Now that the markets have a much higher penetration of foreign investors, it is a storehouse of another scam. The BSE Sensex today closed at 8861, which gives another wave of caution.
The Lahiri committee has recommended phasing out the PN route altogether in 3 years. It remains to be seen if, given the present circumstances, this is carried out.
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