Following the decision of the Government of India to permit qualified foreign investors (QFIs) to invest in the Indian stock markets, SEBI and RBI yesterday issued detailed guidelines (here and here) to operationalise the investment mechanism.SEBI has introduced a number of checks and balances to prevent misuse of this route. For example, significant KYC obligations have been imposed on the depository participants. Moreover, the QFIs are required to provide details regarding their beneficial ownership to prevent anonymity in trading. In the context of foreign institutional investors (FIIs), SEBI has in the past sought to ascertain details of beneficial ownership of shares, but not always with success. It remains to be seen whether SEBI will be faced with a similar situation with respect to QFIs. Further, QFIs cannot issue offshore derivative instruments such as participatory notes. All these are intended to ensure close scrutiny of investments such that significant inflows or outflows do not cause undue volatility in the Indian stock markets thereby affecting investors in general.