SEBI slams FII for inadequate disclosure

In a recent investigation, the Securities and Exchange Board of India (SEBI) came across apparent discrepancies with respect to disclosure filings made for the issuance of offshore derivative instruments (ODIs) by Société Générale to its counterparties. Société Générale is registered with SEBI as a foreign institutional investor (FII) under the SEBI FII regulations.

On 15 December 2009 SEBI asked Société Générale to submit information regarding the ODIs issued to Hythe Securities during the period January 2006 to January 2008, which had Reliance Communications scrips as underlying securities. Société Générale was also asked to provide documents in support of the transactions with Hythe and any onward issuance of ODIs.

In its email reply of 24 December 2009 Société Générale acknowledged it had inaccurately reported its transactions with Hythe in its monthly ODI reports to SEBI. Following SEBI’s request for further information, Société Générale clarified that based on the dealing, booking instruction and settlement of Hythe, the latter was the ultimate beneficiary of the ODIs issued by Société Générale.

The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.