Mumbai: Market watchdog SEBI on Wednesday banned the
leading English bank Barclays from issuing offshore derivative
instruments following its failure to provide "true and
accurate picture of transactions" as required by the
"I hereby direct Barclays Bank Plc not to issue or
subscribe or otherwise transact in any fresh or new offshore
derivative instrument till such time as Barclays satisfies
SEBI that it has put adequate systems, processes and controls
in place to ensure true and correct reporting of its ODI
transactions to SEBI," said SEBI member KM Abraham in his
The offshore derivative instruments (ODIs) are investment
vehicles used by overseas investors to park funds in Indian
equities and derivatives.
Barclays would be required to furnish a certificate
from an auditor of international standing about its ability to
correctly report transactions, the order further said.
The bank has been given time till December 18 to submit
The SEBI issued the order after finding that "Barclays
has been non-compliant with the provisions of regulations and
is not capable of providing information. As a regulator,
therefore, SEBI cannot allow such an entity to continue with
any activity with regard to ODIs".
The case pertains to reporting of four ODIs issued by
Barclays way back in December 2006 with Reliance
Communications as underlying assets. Initially, Barclays in
its report to the SEBI had said that ODIs were issued to the
UBS AG. Later, the bank told the regulator that they were
issued to Hythe Securities and not UBS.
Taking exception to such reporting, the market watchdog
said the code of conduct "prohibits an FII to make any untrue
statement or suppress any material fact in any documents,
reports or information furnished to the SEBI."
FII regulations, it added, also cast responsibility on
the overseas institution to ensure that any downstream
issuance of ODIs is in strict compliance with the norms.
"It is evident that Barclays was aware that the ODIs
issued by it to Hythe Securities were onward issued to Pluri.
However, Barclays has continued to misrepresent to the
regulator that the ODIs were not issued back-to-back to any
other entity," the order said.
"This shows the blatant disregard by Barclays in
complying with the provisions of the FII regulations", the
SEBI said while issuing the order against the bank.
Barclays in a late night statement in Mumbai said it
will fully cooperate with SEBI during the process of examining
some of its derivative transactions .
"Barclays confirms that it has this evening received
notification from the SEBI of a show-cause notice". Since
receiving SEBI`s original email request of 24 September 2009,
we have been and will continue to co-operate fully with SEBI
as it examines certain offshore derivative transactions," the