The Securities and Exchange Board of India on Wednesday ruled out banning foreign institutional investors from issuing participatory notes.

"We are not planning to ban participatory notes," Sebi chairman M Damodaran said on the sidelines of the CII National Conference.

Sebi had imposed a one-year ban on UBS from issuing offshore derivative instruments after a probe into the 'Black Monday' stock market crash of May 17 last year.

Sebi had issued showcause notices to 12 entities and had taken action against UBS Securities Asia, for not complying with its rules of furnishing details of participatory notes issued to other investors.

Participatory notes are offshore derivatives having underlying Indian equity. He said that Sebi was probing 11 entities for possible involvement in the 'Black Monday' crash.

"Twelve parties were issued notices and the proceedings are at various stages," Damodaran said adding that Sebi has not named any other entity as their explanation might turn out to be "satisfactory".

The Sebi chief also announced that separate delisting norms would be put in place for thinly traded scrips in the next six months.

"There will be a simpler exit route. We are working on a policy to delist companies that were listed during the less regulated regime and are today thinly traded," Damodaran said.

The thinly traded companies find it difficult to delist through the reverse book-building route as price discovery is not possible when their shares are not traded actively in bourses.

While Sebi is working on simpler delisting norms for thinly traded companies, Damodaran made it clear that there would not be any extension of December 31, 2005 deadline for compliance with the clause 49 of the listing agreement.

'The requirement of specified number of independent directors is only an arithmetic and would by itself not ensure corporate governance. It is a start to the process,' Damodaran, said.

Easing of delisting norms is expected to benefit a large number of small companies, which are listed on the bourses but are not actively traded. Small companies have a few shareholders and want to delist.

At present, companies wishing to delist have to comply with reverse book building process specified in Sebi's (Delisting of Securities) Guidelines 2003. The reverse book-building facility is allowed only on the BSE or the NSE.