Mumbai: Markets regulator has barred Societe Generale (SocGen) from conducting new transactions in offshore derivatives instruments until such time as it complies with the country`s reporting requirements.
In a notification late on Friday, the Securities and Exchange Board of India (SEBI) said SocGen which operates in India as a foreign institutional investor, had wrongly reported certain transactions.
The transactions related to the issue of overseas derivative instruments between January 2006 and January 2008 with Reliance Communications as the underlying security, to a company called Hythe Securities.
Of the 48 transactions that SocGen had with Hythe, it had admitted to misreporting 14 transactions, said the SEBI order, which can be viewed on SEBI`s website: here
SocGen officials in Hong Kong and Australia could not be immediately reached for comment.
Under Indian regulations foreign entities in India, acting on behalf of clients overseas, have to fully disclose information regarding the issue of off-shore derivatives instruments and provide details of the ultimate beneficiary client.
Offshore derivative instruments (ODIs) such as participatory notes or equity-linked notes are issued by registered foreign institutional investors to their clients, who want to take an indirect exposure to the Indian markets.
The SEBI order said SocGen had failed to adhere to these norms "as it had little or no relevant knowledge of the ultimate beneficiary of the ODIs issued by it".
"From the submissions and documents provided by SG, it appears it had shirked its responsibility cast on it under the regulations and has left it to its subscriber -- Hythe, which is not registered and regulated by SEBI," the order issued by SEBI whole-time member K.M. Abraham said.
The order also said Societe Generale was required to reply as to why appropriate proceedings including cancellation of its registration as a foreign institutional investor should not be initiated against it.
SocGen has been given 30 days to reply to the order, which comes into effect immediately.
In December, SEBI had issued similar prohibitory orders against Barclays Bank Plc for reporting violations, regarding issue of ODIs with Reliance Communications as the underlying security.