SEBI’s Probe Finds Going Tough With Foreign Regulators

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SEBI’s Probe Finds Going Tough With Foreign Regulators

| Updated: May 1, 2023 14:33

Short seller Hindenburg’s report which sent ripples across global markets in January, alleging market manipulation by the Adani Group at the expense of investors’ risk, is currently under SEBI probe. The market regulatory board has sought a six-month extension to follow up, in particular, “12 suspicious transactions for possible violations related to mis-representation of financials, circumvention of Regulations and/or fraudulent nature of transactions.” 

However, Securities and Exchange Board of India’s (Sebi’s) investigation into the Hindenburg allegations is making slow progress when it comes to obtaining information from overseas regulators, particularly around ultimate beneficial ownerships of certain foreign portfolio investors (FPIs), said people in the know.

“Establishing ultimate beneficial ownerships for FPIs is a very complex exercise. Several jurisdictions allow omnibus structures where the end beneficiaries are not required to be captured or are based in some other geographies. This entails writing to different regulators, some of whom may not be entitled to share information due to different pacts,” shared a person in the know.

Sources said Sebi has been writing to various regulators in several jurisdictions over the past few weeks regarding the Adani issue.

Some of the information sought includes bank statements from offshore financial institutions, background of the offshore-related entities, licences received by them and letters submitted by Adani group companies to the offshore regulators.

Transactions by the group’s entities in places like Mauritius, UAE, Cyprus and British Virgin Islands have come under scanner following the allegations by Hindenburg.

An email sent to Sebi did not elicit any response till the time of going to press.

Typically, Sebi has memorandums of understanding (MoUs) with offshore regulators for exchange of information. For tax-related matters, information exchange is usually done under the double taxation avoidance agreements (DTAAs).

“The MoUs work in most cases. However, it also depends on the extent of data sought. Not all regulators are very forthcoming with providing voluminous information. It requires multiple requests and follow-ups, which can be a cumbersome process,” said a legal expert.

Sources said that the details sought by Sebi are to reconfirm certain transactions and connections among entities. It is also for independent verification and analysis of the information submitted by Adani group companies.

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