Bankers tried to create illegal investment arm for Anil: FSA

Reliance Group says it’s not party to proceedings in London, matter closed with Indian regulators through consent order.

The Financial Services Authority (FSA), the UK’s market and financial services regulator, has turned the heat on Reliance Group Chairman Anil Ambani. According to a report in the Financial Times, two UBS bankers tried to create Pleuri, an offshore vehicle through which Ambani “could illegally invest in securities at home”.

The “evidence” submitted by FSA, said the FT report, was heard in a London tribunal. Under Indian law, Indian nationals cannot invest in stocks through foreign subsidiaries.

Anil Ambani, who bank executives described as a “mega client”, was the ultimate owner behind the Mauritius-based vehicle, the tribunal heard. “Pleuri was established with the specific objective of investing in Indian stocks,” FT quoted the evidence presented by FSA in a case against the former head of UBS’ London-based India desk.

Details of the controversial structure have emerged in the case of Sachin Karpe, former head of the desk that managed Indian client portfolios at UBS’ wealth management division in London. Karpe is challenging a £1.25m fine from FSA, FT said.

“The source of funds [...] was plainly the Ambani family,” Jonathan Crow, counsel for the FSA, told the tribunal on Tuesday.

According to the report, “(Ambani) asked for a transaction and Sachin Karpe enabled it,” said Michael Blair, Karpe’s barrister. “There was no suggestion that the client himself was damaged. The most that can be thrown at (Karpe’s) door was that he probably ought to have told the client that the bank would not deal with him, because the transaction was not legal in India.” Blair described the FSA’s case as “fat and splurgy”.

Websites quoted the Reliance Group spokesperson as saying the matter was nearly five years old, and had already been closed with Indian regulators under a consent order framework in January 2011. The matter relates to regulatory action in the UK against former employees of a foreign bank, for unauthorised trades made by them and misuse of a large number of client accounts. The bank has already accepted the weaknesses in its internal systems and processes, and settled the matter with the UK regulators by payment of a fine. “There are no charges levelled against us by the UK regulators in these proceedings. As such, we are not party to these proceedings, and not represented therein,” he said.