ADAG denies charge as report says Pleuri for Ambani funds

In a statement issued from New Delhi, the Anil Dhirubhai Ambani Group said that no charges have been levelled against them by the UK regulators in these proceedings. The group also said that the five-year-old matter relates to a regulatory action in the UK against a foreign bank’s former employees for misuse of client accounts and unauthorised trades made by them

London: Two UBS bankers here unsuccessfully tried to create an offshore investment entity allegedly to enable industrialist Anil Ambani route his funds back into Indian stock market, said a media report quoting proceedings at a financial market tribunal here.

In a statement issued from New Delhi, the Anil Dhirubhai Ambani Group (ADAG), however, said that no charges have been levelled against them by the UK regulators in these proceedings.

The group also said that the five-year-old matter relates to a regulatory action in the UK against a foreign bank’s former employees for misuse of client accounts and unauthorised trades made by them.

British daily Financial Times has reported that “two UBS bankers tried to create an offshore vehicle through which one of India’s most powerful businessmen could illegally invest in securities at home, according to evidence heard in a London tribunal.”

“Anil Ambani, whom bank executives described as a ‘mega-client’, was the ultimate owner behind a Mauritius-based vehicle called Pleuri, the tribunal heard,” the report said, while noting that Indian nationals and companies are not permitted to invest in Indian securities through foreign institutional investors.

“Pleuri was established with the specific objective of investing in Indian stocks, according to evidence presented by the UK’s financial regulator in a case against the former head of UBS’ London-based India desk,” the report added.

Reacting to the report, a Reliance Group spokesperson said that “the matter relates to regulatory action in the UK against former employees of a foreign bank, for unauthorised trades made by them and misuse of a large number of client accounts.

“The bank has already accepted the weaknesses in its internal systems and processes, and settled the matter with the UK regulators by payment of a fine.”

"There are no charges levelled against us by the UK regulators in these proceedings. As such, we are not party to these proceedings, and not represented therein,” he added.

The spokesperson said that “the matter is nearly five years old, and has already been closed with Indian regulators under the consent order framework in January 2011.”

He said that all the aspects reported by the media “including the ownership and/or beneficial status of certain entities investing in India, were considered by the Indian regulators, while passing the consent order in January 2011.”

The Financial Times report said that the “details of the controversial structure have emerged in the case of Sachin Karpe, former head of the desk that managed Indian client portfolios at UBS’ wealth management division in London.

Mr Karpe is challenging a 1.25 million British pound fine from the Financial Services Authority (FSA), it added.

Mr Karpe and the other UBS banker are no longer working with the Swiss bank and they had “allegedly misled UBS’ compliance team by maintaining that Pleuri was owned by a wealthy French couple.”

“UBS ultimately refused to sanction the structure,” it said.

The report said that FSA has told the tribunal that the “source of funds was plainly the Ambani family”, while it quoted a counsel for Mr Karpe as saying that Mr Ambani had “asked for a transaction and Sachin Karpe enabled it.”

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SEBI prohibits sub-contracting of core biz by intermediaries

As per the guidelines announced on Thursday, intermediaries like brokers and depository participants “desirous of outsourcing their activities shall not outsource their core business activities and compliance functions”

Mumbai: Capital market regulator Securities and Exchange of India (SEBI) on Thursday released guidelines on outsourcing by intermediaries like brokers and depository participants that prohibit sub-contracting of core business activities, reports PTI.

The guidelines also direct them to put in place a comprehensive policy on the outsourcing of activities.

“An intermediary seeking to outsource activities shall have in place a comprehensive policy to guide the assessment of whether and how those activities can be appropriately outsourced,” SEBI said in a circular.

The board or partners of the intermediary will have the responsibility for the outsourcing policy and overall responsibility for related activities undertaken under it, SEBI said.

The principles for outsourcing by intermediaries have been framed based on views given by various intermediaries, stock exchanges and depositories, it added.

“The intermediaries desirous of outsourcing their activities shall not outsource their core business activities and compliance functions,” SEBI said.

Such functions include activities like execution of orders and monitoring of trading activities of clients in case of stock brokers, dematerialisation of securities in case of depository participants and investment related activities in case of mutual funds and portfolio managers.

SEBI said the intermediaries shall be responsible for reporting of any suspicious transactions to Financial Intelligence Unit or any other competent authority in respect of activities carried out by the third parties.

“In view of the changing business activities and complexities of various financial products, intermediaries shall conduct a self assessment of their existing outsourcing arrangements within a time bound plan, not later than six months from the date of issuance of this circular and bring them in line with the requirements of the guidelines/ principles,” it said.

Regarding the principles for outsourcing, the regulator directed the intermediaries to establish a comprehensive outsourcing risk management programme to address outsourced activities and the relationship with the third party.

“The intermediary shall ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and regulators, nor impede effective supervision by the regulators,” SEBI said and also asked them to conduct due diligence while selecting the third party.

All relationship between market intermediaries and the outsourcing partners have to have written contracts describing the material aspects of the arrangement.

“The intermediary and its third parties shall establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of backup facilities,” SEBI directed and added that intermediaries should also ensure that the outsourcing firm protect confidential information.

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SEBI sets up international advisory board; first meeting next month

The IAB would help capital market regulator SEBI better understand the global market trends and emerging developments and challenges. The decision to set up an IAB was taken by the SEBI board in its meeting on 28th July, pursuant to which SEBI began the process of setting up this board

New Delhi: At a time when global financial developments hold the key to stock market movements in India, the Securities and Exchange Board of India (SEBI) has set up an international advisory board (IAB), which would hold its first meeting next month, reports PTI.

The IAB would comprise of seven members, including SEBI chairman UK Sinha.

The six outside members include Viral Acharya from New York University’s Stern School of Business, Singapore Exchange’s independent director Jane Diplock, Harvard Business School’s Mark Maletz, Maureen O’Hara from Cornell University’s Johnson Graduate School of Management, Arvind Panagariya from Columbia University’s School of International & Public Affairs and China Banking Regulatory Commission’s Andrew Sheng.

The first meeting of the IAB is scheduled on 27 January 012 in New Delhi, as per a memorandum submitted to SEBI board in its last meeting on 24th November.

The IAB would help capital market regulator SEBI better understand the global market trends and emerging developments and challenges.

The decision to set up an IAB was taken by the SEBI board in its meeting on 28th July, pursuant to which SEBI began the process of setting up this board.

For the probable names, SEBI had sought suggestions from its whole-time members, as also from the two former Reserve Bank of India (RBI) governors YV Reddy and Bimal Jalan, besides Raghuram Rajan, professor of finance, University of Chicago, and Kaushik Basu, Chief Economic Adviser, ministry of finance.

The IAB would discuss various macro-level and strategic issues and help SEBI in its mandate to protect the interests of investors, promote the market growth and regulate it.

All the recommendations of the IAB, along with the actions taken by SEBI, thereon, will be reported to the SEBI board.

It was previously decided that the members of the IAB will be nominated by the SEBI chairman, from amongst the eminent persons in law, finance, economics and other related areas.

The IAB members would have a three-year term, and would be paid “an honorarium of $2,500 for each meeting.” SEBI would also arrange for air travel in business class, five-star accommodation and other incidental matters for the members.

The IAB would meet twice in a year in India, and a third meeting, if required, would be organized by SEBI through video-conferencing.

The SEBI chairman would preside the IAB meetings, where all the whole-time members of SEBI would be permanent invitees.

SEBI chairman can bring in the senior functionaries from related organizations or other experts as special invitees.

At its board meeting in July, SEBI had told its board that the events related to the recent global financial crisis have highlighted the need for continuous assessment of various developments and an immediate regulatory response.

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