Monday, May 20, 2024

Sebi’s Adani probe hits a wall with offshore regulators.

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The Securities and Exchange Board of India (SEBI) is reportedly facing challenges in obtaining information from overseas regulators, mainly related to the ultimate beneficial ownership of foreign portfolio investors (FPIs), as part of its investigation into the allegations made by Hindenburg. The research focuses on transactions made by Adani group companies in countries like Mauritius, UAE, Cyprus, and the British Virgin Islands. SEBI has been writing to regulators in several jurisdictions to obtain information such as bank statements from offshore financial institutions, the background of offshore-related entities, licenses received by them, and letters submitted by Adani group companies to offshore regulators. However, establishing ultimate beneficial ownerships for FPIs is a complex process. Some jurisdictions allow for omnibus structures where end beneficiaries are not required to be captured or based in other geographies. This makes it challenging for SEBI to obtain information, as regulators may not be entitled to share information due to different pacts. SEBI typically has memorandums of understanding with offshore regulators for information exchange, but not all regulators are forthcoming with providing voluminous information. The details sought by SEBI are for reconfirming certain transactions and connections among entities and for independent verification and analysis of information submitted by Adani group companies. The regulator has filed a petition before the Supreme Court seeking an extension in the deadline by six months to complete the Adani probe, citing difficulties in obtaining bank statements from multiple domestic and international banks, some of which are located offshore and may require assistance from offshore regulators.

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