Emerging India Focus Funds settles FPI norms violation case with Sebi

Emerging India Focus Funds, a foreign portfolio investor (FPI), has settled a matter related to alleged violations of FPI norms with the Securities and Exchange Board of India (Sebi) for Rs 64.35 lakh.

 

Under the settlement regulations, the fund settled the matter with the markets regulator without accepting or denying the allegations.

 

According to Sebi’s settlement order, there were several alleged violations of the FPI regulations and intermediary regulations. 

 

The regulator had sent a show-cause notice to the fund on this in February.

 

The high-powered advisory committee of Sebi considered the settlement terms and recommended the settlement amount, which was later approved by a panel of whole-time members.

 

 

According to the Sebi order, the fund allegedly violated Regulation 22 (1)(c) and (h) of the FPI Regulations 2019.

 

These two clauses relate to the fit-and-proper criteria of the investor and informing the designated depository participant in writing if there is any material change in the ownership or control of the fund.

 

The order also points to the alleged violation of Clause 6 of the code of conduct of FPI regulations, which directs FPIs to not make any untrue statement or suppress material facts in any document.

 

“In  view  of  the  acceptance  of  the  settlement  terms  and  the  receipt  of settlement amount as above by Sebi, the instant adjudication proceedings initiated against Applicant vide SCN dated February 29, 2024 is disposed of,” notes the Sebi order dated November 18.

 

The order shows that the fund has paid the settlement amount on November 13.

 

The fund was named by Hindenburg Research in its report against the Adani group, alleging its role in inflating the prices.

 

A source said that the show-cause notice was in a different matter and not related to the Adani Group. 

 

Business Standard could not independently verify if the settlement was in relation to the allegations levelled by the Hindenburg Research or any probe related to it.  

US-based short-seller Hindenburg Research, in its report against the Gautam Adani-led group in January 2023, had alleged that several FPI structures were used to circumvent public shareholding norms.

 

“The trading patterns suggest that the stock parking entities and the suspicious offshore entities may have artificially inflated the volume and/or price of some Adani listed companies,” the Hindenburg report had noted while mentioning Emerging India Focus Funds and two other FPIs.

 

The short-seller had alleged that Vinod Adani was linked to or controlled several Mauritius-based shell entities.

 

The Adani group, on several instances, had denied the allegations levelled by Hindenburg. Sebi had also sent notices to the short seller in the matter. 

 

This year, the short seller had questioned the objectivity of Sebi chairperson Madhabi Puri Buch in probing matters related to the Adani group alleging that she held stake in FPIs linked to the conglomerate. However, Buch had refuted the allegations as baseless.

 

Earlier in August, Sebi had submitted that it had completed 23 of the 24 investigations in the matter.

 

In January this year, the Supreme Court said there was no ground to transfer Sebi’s investigation into the Adani group-Hindenburg Research matter to a special investigation team (SIT). It directed the market regulator to complete its probe within three months.

 

In response to concerns about the misuse of FPIs to circumvent minimum public shareholding norms, the markets regulator has enforced a granular disclosure regime for FPIs on economic interest and ownership in case the FPI breaches specified thresholds.