Sebi revokes ban, allows Barclays to issue ODIs

The Securities and Exchange Board of India (Sebi) has revoked the ban on Barclays Bank Plc, which was earlier barred from issuing offshore derivatives instruments (ODIs).

This was after the foreign entity assured the regulator that the deficiencies in its reporting system had been remedied. The bank also submitted an “assurance report” by KPMG.

“From the submissions made by Barclays and the review reports by KPMG... Barclays has undertaken steps to validate its systems and processes to ensure that true and corrects reports of its ODI activity are furnished to Sebi,” said K M Abraham, Sebi whole-time member, in an 18-page order.

ODIs are investment vehicles issued by foreign institutional investors to unregistered overseas investors for parking their funds in Indian equities and derivatives.

The market regulator banned Barclays in December 2009 from transacting in fresh ODIs till “it satisfies Sebi that it has put adequate systems, processes and controls in place to ensure true and correct reporting of its ODI transactions”. Barclays was also directed to furnish a certificate from an auditor.

According to the latest order, KPMG, which was appointed by Barclays, said in its final report that the information provided in the reports of Barclays to Sebi during the review period was accurately extracted from the bank’s source system. “It also certified that the said reports accurately reflect all outstanding positions of ODIs,” the latest order says.

The Sebi order last year alleged that Barclays failed to provide true, fair and complete details of its ODI activities and, prima facie, issued ODIs to an unregulated entity. While Barclays reported that it issued four ODIs to UBS AG, with shares of Reliance Industries as the underlying, subsequent reports indicated that the counterparty was not UBS AG but Hythe Securities. There were 14 other trades with the same counterparty that were not part of the periodical reports filed earlier.