Financial Daily from THE HINDU group of publications
Friday, Dec 09, 2005
Financial Daily from THE HINDU group of publications Friday, Dec 09, 2005 |
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Foreign Institutional Investors Markets - Regulatory Bodies & Rulings SEBI fines CSFB for `short selling' Reliance scrip Our Bureau
Mumbai , Dec 8 IN a significant order, the Securities and Exchange Board of India has imposed a fine of Rs 10 lakh on foreign institutional investor Credit Suisse First Boston (Mauritius) Ltd for alleged short sales of Reliance Industries Ltd (RIL) scrip in 2002. The market regulator had suspended Credit Suisse First Boston (India) Securities Pvt Ltd as a stockbroker for a period of two years with effect from April 18, 2001, for violating SEBI rules. The SEBI order, dated December 5, 2005, found CSFB guilty of selling 1,26,900 shares of RIL on December 16, 2002, without having possession of these shares (thereby constituting to short sales, which are not allowed by the rules). The SEBI officer also rejected the contention of CSFB that short-selling was done inadvertently, saying no proof for such claim was provided by the FII. CSFB had registered a sub-account with SEBI under Kallar Kahar Investments Ltd (KKIL). The case relates to the sales of 14,78,170 shares of RIL by KKIL on December 16, 2002 when its actual holding as on the trade date was 13,51,270 shares thus resulting in a short sales of securities to the extent of 1,26,900. The SEBI order comes at a time when reports suggested that CSFB was planning re-entry into India, since the two-year suspension was over. Earlier in November 27, 2002, SEBI had rejected CSFB's application for renewal of certificate of registration as an FII and KKIL application for reviving the sub-account. Significantly, SEBI is also considering allowing short sales of securities by institutions. In CSFB's favour, SEBI officer admitted that the FII had not made disproportionate gain or any unfair advantage as a result of the alleged short sales. Nor was there any repetition of the "default" by CSFB. The six-page order by the adjudicating officer said, "I do not find any material on record indicating the repetition of default on the part of the noticee (CSFB). I also do not find from the records that the noticee has expropriated any amount of disproportionate gain or any unfair advantage made as a result of the default." While imposing Rs 10 lakh penalty, the SEBI adjudicating officer relied on the regulation 15 (3) (a) of the SEBI (Prohibition of Fraudulent and Unfair Trade practices relating to Securities Market) Regulations, 1995. The section stipulates that FII can transact business only on the basis of taking and giving deliveries of securities bought and sold. In this case, CSFB was not in a position to deliver 1,26,900 shares of RIL sold on December 16, 2002, the order noted.
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