Settlement of Securities Violation Matters by Foreign Portfolio Investors (FPIs)
Several foreign portfolio investors (FPIs) who held significant stakes in Adani Group companies are seeking to resolve securities violation issues with Sebi. They have agreed to pay fines to settle the matter, according to sources familiar with the situation.
Legal Representatives File Settlement Applications
- Eight FPIs โ Albula Investment Fund, Cresta Fund, MGC Fund, Asia Investment Corporation (Mauritius), APMS Investment Fund, Elara India Opportunities Fund, Vespera Fund, and LTS Investment Fund โ have filed a total of 16 settlement applications with Sebi.
- Regulator accused FPIs of not maintaining and disclosing information about their beneficial owners and breaching investment limits in Adani Group entities during specific periods.
Submission of Settlement Applications
- Other FPIs holding Adani Group stocks and facing allegations of violations by Sebi are also planning to submit settlement applications.
- Parties charged with securities law violations often seek settlement, leaving Sebi to decide whether to accept or reject the terms.
Review and Negotiation Process
- Sebi reviews the settlement applications and negotiates terms with FPIsโ legal representatives.
- If terms are agreeable, they are presented to an advisory committee for recommendations.
- The committee may suggest modifications or reject the settlement, after which Sebi will issue a settlement order or take legal action.
Show-Cause Notices and Investigations
- Sebi issued show-cause notices in two sets โ enquiry proceedings and adjudication proceedings โ questioning FPIs on violations and imposing fines.
- FPIs have 60 days to respond to show-cause notices and file for settlement.
- Investigation into Adani Group shareholding patterns began in October 2020 following alerts on foreign holdings concentration.
Continuation of Probe and Allegations
- Two years later, Hindenburg Researchโs report raised allegations against Adani Group, sparking renewed efforts by Sebi.
- Sebi analyzed trading patterns of FPIs in Adani Group stocks for price volume manipulation and other violations.
- The regulatory body struggled to identify ultimate beneficial owners due to lack of information from foreign counterparts.
Supreme Courtโs Intervention and Pending Investigations
- The Supreme Court directed Sebi to conclude its investigations into the allegations against Adani Group.
- Exit or reduction in stakes by FPIs in Adani Group companies was noted, with limited information available on their current holdings.
- Despite the closure of PILs in January, Sebi was instructed to complete its investigations and bring the matter to a legal conclusion.
Hot Take
Resolution of securities violation matters by FPIs with Sebi could mark the end of a prolonged saga and bring closure to the issue.
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