The Hindu Business Line : SEBI slaps Rs 1-cr fine on Goldman Sachs

Breaking the rule
SEBI had issued a circular on ODIs to monitor the investment by FIIs/sub-accounts
The conduct of GSIML in violation of the SEBI circular regarding FII regulations for which adjudication penalty is imposable under the SEBI act

Mumbai , Sept. 8

The Securities and Exchange Board of India has slapped a fine of Rs 1 crore on Goldman Sachs Investment (Mauritius) Ltd (GSIML) for making false declaration regarding issuance of Offshore Derivative Instrument (ODI) to Overseas Corporate Bodies (OCBs).

It was prima facie made out that Goldman Sachs (GSIL), an affiliate of GSIML, a sub-account registered with SEBI, had issued ODIs to Magnus Capital Corporation Ltd (MCCL), an OCB, in November 2002.

Under the SEBI rule, all FIIs/sub-accounts are required to give an undertaking declaring their outstanding offshore derivative instruments.

GSIML had made an undertaking that it had not issued any ODI, which, according to SEBI, was not true.

SEBI is of the view that Goldman Sachs is expected to have compliance of the highest level, which was found lacking in the instant case.

In violation of rule

The Joint Parliamentary Committee report on the securities market scam observed that OCBs had played a significant role in the scam. In view of this observation, SEBI had issued a circular on ODIs to monitor the investment by FIIs/sub-accounts.

The conduct of GSIML has thus been in violation of the SEBI circular regarding FII regulations for which adjudication penalty is imposable under the SEBI Act, the regulator said in the order issued on Friday.

SEBI, last month, had slapped a penalty of Rs 1 crore on Citigroup Global Markets Mauritius Ltd, an affiliate of Citigroup, for making a false statement regarding the issue of ODIs to Magnus Capital Corporation Ltd.

In both cases, the overseas corporate body is the same — MCCL.