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Mumbai, May 15 The Securities Appellate Tribunal (SAT) on Thursday set aside the impugned SEBI order penalising the FII Goldman Sachs Investments (Mauritius) Ltd in the matter of issuing off-shore derivative (ODI) instruments to an overseas corporate body (OCB).

SAT, while allowing the appeal by Goldman Sachs, observed that SEBI’s FII Regulations, 1995, has no prohibition on the FIIs or their sub-accounts from dealing in ODIs with OCBs.

SEBI in order to monitor the investments by FIIs through the derivative instruments had directed them to report the issuance of ODIs. FIIs were also asked to furnish an undertaking that they have not issued any ODI to Indian Residents/ NRIs/ PIOs/OCBs and were to also to report the dealings in ODIs every fortnight.

The undertaking reporting format issued in October 2001 was revised in August 2003, SEBI had observed violations of its prescribed guidelines by Goldman Sachs. SEBI in its order also held Goldman Sachs guilty of non-compliance, so far as furnishing an undertaking with regards to prohibitions from dealing in ODI with OCBs. SEBI imposed a fine of Rs 1 crore on Goldman Sachs through an order passed in September 2006, for not furnishing an undertaking that they had not dealt in ODIs with OCBs.

The market regulator observed that Goldman Sachs issued ODI to Magnus Capital Corporation Ltd (MCCL) in November 2002, which was an OCB, in accordance with RBI communications to SEBI in December 2003.

While setting aside the impugned order SAT said, “The board (SEBI) is directed not to insist on the undertaking prescribed by the revised reporting format.”

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