SEBI bans Barclays from issuing offshore derivatives
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Last Updated: Thursday, December 10, 2009, 08:40
  
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 regulations.

"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 order today.

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 its reply.

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 statement said.

PTI


First Published: Thursday, December 10, 2009, 08:40


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