sebi:WTM/KMA/IMD/294/08/2010
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Facts / Headnote
Ex parte directions dated December 9, 2009 revoked with immediate effect; proceedings disposed of with advice to strictly comply
Provisions invoked
- s. 19
Regulations
- Reg. 6
- Reg. 199
- Reg. 20
- Reg. 20A
- Reg. 15A
- Reg. 15A(1)
- Reg. 15A(2)
- Reg. 15(A)(2)
Parties
- Barclays Bank PLC
Holding
Barclays violated Regulation 20A of the FII Regulations by misreporting ODI counterparties and failing to report onward issuance. The ex parte restraint on issuing fresh ODIs imposed on December 9, 2009 was revoked and proceedings were disposed of after remediation and auditor certification.
Full text
Page 2 of 18 on a request from Barclays, vide letter dated December 18, 2009, the time for filing the reply was extended to February 4, 2010 and the hearing was rescheduled to February 11, 2010. Subsequently, Barclays filed its reply vide letter dated February 5, 2010, forwarded through an electronic mail (e-mail). On February 11, 2010 (the date of hearing), Barclays was represented by Mr. Janak Dwarkadas, Senior Advocate, who made submissions on the same lines as in the aforesaid reply. Ms. Susan Chan and Ms. Raccel Hut from Barclays were also present during the hearing. The submissions and contentions of Barclays have been dealt with in the succeeding paragraphs in this Order.
Page 3 of 18 counterparty to the transactions was not UBS AG, as earlier reported by it, but was Hythe Securities Limited (Hythe). It was also found that the ODIs issued to Hythe were onward issued to Pluri Emerging Companies PCC Cell E Emerging Markets Growth Fund (hereinafter referred to as Pluri). Besides, there were fourteen other trades with the same counterparty which were not part of the periodical reports earlier filed by Barclays. The aforesaid acts of Barclays were found to be prima facie in violation of the provisions of the FII Regulations. Accordingly, the Order was passed, issuing certain directions, as mentioned in paragraph 1 above.
Page 4 of 18 particular transaction, the mapping table was locked. In December 2006, a clerical error resulted in the matching of a trade identification number with the wrong counterparty and a consequential misreporting of the relevant transaction counterparty to SEBI. The person then responsible for preparing the mapping table copied and pasted the client data of UBS AG for the trade preceding the trade with Hythe in the list into the client fields for the Hythe trade. As the data in the mapping table is static, the error was not identified automatically and resulted in UBS being reported as the counterparty for the relevant ODIs in subsequent report. It was also submitted that its present system for producing ODI reports to SEBI is substantially more robust and far less susceptible to human error and that all data entered/manipulated by human operation is cross checked and reconciled to the original trade data to ensure consistency and accuracy of reporting. In respect of the said allegation, the learned senior counsel has conceded that the reports should not have shown UBS AG, but submitted that the same was not deliberate or wilful. However, the aforesaid
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Source: SecMarx — sebi:WTM/KMA/IMD/294/08/2010. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.