India’s capital markets regulator told the nation’s Supreme Court it has continuously tightened rules concerning so-called beneficial ownership and related-party transactions, key aspects of a hearing into whether the Adani Group manipulated its stock price.
(Bloomberg) — India’s capital markets regulator told the nation’s Supreme Court it has continuously tightened rules concerning so-called beneficial ownership and related-party transactions, key aspects of a hearing into whether the Adani Group manipulated its stock price.
A panel appointed by the court to look into the Adani matter said in an interim report it saw “no evident pattern of manipulation” in billionaire Gautam Adani’s companies and there was no regulatory failure. However, it added that the Securities and Exchange Board of India made several amendments between 2014-2019 that constrained regulators’ ability to investigate. For instance, rules in 2014 explicitly prohibited “opaque structures” and required beneficial owners holding 25% or more to be identified, but an amendment in 2019 deleted the opaque structures provisions.
Sebi rebutted the panel’s observations, saying its actions tightened oversight, according to a document obtained by Bloomberg that was filed to the court on Monday. Sebi’s response comes a day before the court resumes hearing the Adani case.
A Sebi representative didn’t respond to an email seeking comment.
Key points from Sebi’s rebuttal:
- Retaining provisions of “opaque structures” would be redundant; all FPIs are mandated to declare beneficial ownership or senior managing official at a minimum
- Investors with more than 25% holding for companies and 15% for trusts, firms with an FPI have to be disclosed as a beneficial owner
- No relaxation of any kind between 2014-2019 in terms of SEBI’s ability to seek additional details from FPIs
- Despite tightening rules on identifying beneficial ownership, challenges remain in identifying investors who spread their holdings across multiple FPIs
SEBI also responded to the committee’s observations on related party transactions, market surveillance mechanisms, investigation timelines and recommendations for regulatory changes.
- Cannot retrospectively apply the law to past transactions
- Investigations into manipulations and misconduct in securities market takes time and evidence is not always immediately evident
- Prescribing timelines on investigation may compromise quality of the investigation
- Government should look into recommendations to create an Unclaimed Property Authority, Multi-Agency Committee, and Financial Redress Agency
The Supreme Court will resume hearing the Adani case on July 11, while Sebi has an Aug. 14 deadline from the court to close its probe into whether the Adani Group violated securities law.
Last month, Sebi tightened norms for large FPIs requiring disclosure of all beneficial owners with more than 250 billion rupees ($3 billion) invested in Indian equities or have more than 50% of equity assets under management invested in a single corporate group.
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