Market regulator the Securities and Exchange Board of India (Sebi) has rejected the application of the UK subsidiary of broking firm First Global for registration as a foreign institutional investor citing poor track record of the parent company's vice-chairman Shankar Sharma.
The regulator has banned Sharma from trading for a year on account of his involvement in fictitious trading.
"I reject the application submitted by First Global (UK)...For grant of certificate of registration as foreign institutional investor," Sebi whole-time Member Prashant Saran said in an order.
The market regulator had barred Shankar Sharma, vice chairman and joint MD of First Global, in February last year from dealing in securities and prohibited him from associating in markets for a period of one year.
"I observe that Sebi with an objective to maintain a fair and transparent securities market...May take into consideration the factors of adverse track record, initiation of proceedings, adverse perception and atmosphere of mistrust against the entity concerned while applying the test of fit and proper person," the order said.
It further said the company is a wholly-owned subsidiary of First Global Stockbroking (FGSB) and that Sharma and Devina Mehra are the directors on board of the UK subsidiary and FGSB.
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"...It can be inferred that Shankar Sharma, directly and indirectly (through FGSB) is the driving force behind the applicant," the Sebi said.
The market regulator further said it cannot take lightly the restrained order and prosecution proceedings pending against the persons, ultimately controlling or influencing the UK subsidiary.
It further said keeping First Global UK out from the securities market will not adversely affect the interest of investors. However, keeping it in mainstream market after considering the past behaviour of its associate entities may cause prejudice to the interest of investors.
"I am of the opinion that the applicant is not a fit and proper person to act as FII in the Indian securities market," Saran said.