Sebi settles case against Citigroup Global Markets

Sebi's probe had revealed that the transactions executed by Citigroup, a FII, against the ODIs through P-notes issued by it "were not off-setting in nature"

The Securities and Exchange Board of India (Sebi) has disposed of the matter against Citigroup Global Markets Mauritius after it paid Rs 1 crore to settle the charges of not complying with the market regulator’s reporting standards for offshore derivative instruments (ODIs).

Sebi had noted these non-compliances during its probe into insider trading and dealings of investors in the shares of erstwhile Satyam Computer Services, during 2008-09.

In a consent order dated April 9, Sebi said it is disposing of the “adjudication proceedings initiated against Citigroup Global Markets Mauritius vide show cause notice... dated August 17, 2011”.

Sebi’s probe had revealed that the transactions executed by Citigroup, a foreign institutional investor (FII), against the ODIs through Participatory Notes (PNs) issued by it “were not off-setting in nature”.

The regulator had observed that 12 transactions made for PNs by Citigroup and six deals in the derivative segment had resulted in profits amounting to $4.13 million.

It was also found that all these six PNs were issued by Citigroup to the same entity through Helios Capital Management Pte Ltd from Singapore on behalf of the fund Helios Strategic Fund which were not reported to Sebi.

According to Sebi’s norms, FIIs which have been issuing ODIs against underlying Indian securities are mandated to report issuance/renewal/ cancellation/redemption of these instruments to Sebi as per a prescribed format.

Therefore, Citigroup, was mandated to submit the ODIs report to Sebi on a monthly basis which it did not do for December 2008 and January 2009, according to the charge.

Sebi also said Citigroup had not submitted complete details of transactions in the specified format and had failed to comply with the reporting standards prescribed by it.

“During the investigation, it was further found from the clarifications provided by the applicant that it has been following the same policy since long time and hence the magnitude of the violation is much more,” it added.

Following its findings, Sebi had initiated adjudication proceedings against Citigroup in 2011.

However, while the proceedings were in progress, Citigroup proposed settlement under the Sebi’s consent order mechanism and in February, 2013 it offered to pay Rs 1 crore.

Thereafter, Sebi’s High Powered Advisory Committee on Consent (HPAC) after deliberations recommended the case for settlement on payment of Rs 1 crore. This was also approved by the panel of whole-time members of Sebi.

Subsequently, Citigroup remitted the amount on April 3, this year.

Sebi noted that enforcement actions, including commencing of the proceedings, could be initiated if any representation made by Citigroup is found to be untrue.