SEBI slaps Rs.1 Crore fine on Goldman Sachs Investment

SEBI has slapped a fine of Rs.1 Crore on Goldman Sachs Investment (Mauritius) Ltd for violation of SEBI circular and SEBI Regulations 1995.

During the course of examination and scrutiny of the declaration furnished in the fortnightly statement on issue of Offshore Derivatives Instruments (ODI) by Goldman Sachs Investment (Mauritius) Ltd. a sub-account (hereinafter referred as ‘GSIML or the noticee’), certain violations of SEBI circular and SEBI (Foreign Institutional Investors) Regulations, 1995 (hereinafter referred as ´FII Regulations´), were allegedly noticed by Securities and Exchange Board of India (SEBI). Pursuant to this, SEBI appointed the undersigned as the Adjudicating Officer under Section 15 I of SEBI Act, 1992, vide its Order dated December 20, 2005, to inquire into and adjudge under Section 15HB of Securities and Exchange Board of India Act, 1992 for the alleged violation of SEBI Circular dated August 8, 2003 and Regulation 13(1) of the FII Regulations.

A show cause notice (SCN) dated June 06, 2006, under Rule 4(1) of SEBI (Procedure For Holding Inquiry And Imposing Penalties By Adjudicating Officer) Rules, 1995 (hereinafter referred as ‘Adjudication Rules’) was issued to GSIML, communicating the allegations levelled against it and calling upon it as to why an inquiry in terms of the said Rules should not be conducted against it. The SCN was delivered through courier on June 12, 2006, to the noticee. Despite the delivery of SCN no reply was filed by GSIML. Pursuant to this, I thought it fit to hold an inquiry in the matter and accordingly issued a notice dated August 4, 2006 and fixed August 25, 2006 for personal appearance of GSIML. In response, GSIML vide its fax dated August 10, 2006, submitted that their company secretarial service provider in Mauritius failed to deliver them the SCN, and sought time till September 30, 2006 to file its reply. Accordingly vide letter dated August 11, 2006, GSIML was advised to file its submissions by August 28, 2006. In this regard a reply dated August 28, 2006 (received on August 31, 2006) was filed by GSIML.

It prima-facie appeared that Goldman Sachs International Ltd. (GSIL), an affiliate of GSIML, (Noticee) a sub-account registered with SEBI issued off-shore derivative instruments to an Overseas Corporate Body (OCB) namely Magnus Capital Corporation Ltd. (MCCL), a Mauritius based entity, and thereby violated the declaration furnished in the fortnightly statement on issue of off-shore derivative instruments (ODIs) submitted to SEBI (as on August 15, 2003). The aforesaid declaration was furnished by the noticee pursuant to SEBI Circular dated August 8, 2003 and which was issued in exercise of the powers conferred by Regulation 20 of FII Regulations.

It was alleged that the noticee GSIML violated SEBI circular dated August 8, 2003 read with Regulation 20 of FII Regulations and Regulation 13 (1) of FII Regulations and for which adjudication penalty is imposable in terms of Section 15HB of Securities and Exchange Board of India Act, 1992. The Section 15HB of SEBI Act, 1992, reads as under:-"Penalty for contravention where no separate penalty has been provided. 15HB. Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.)"

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Source : Equity Bulls

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