ED files plaint against fintech firm SIMPL for FDI policy violation

The ED accused Buy Now Pay Later app SIMPL of breaching FDI norms by issuing convertible notes and receiving foreign investment under automatic route without approval

The Enforcement Directorate (ED) on Wednesday filed a complaint against One Sigma Technologies Pvt Ltd (SIMPL) and its Director Nithya Nand Sharma for allegedly violating India’s foreign exchange laws to the tune of ₹913.7 crore.

 

The enquiries in the matter were initiated on the basis of credible information that SIMPL has received a substantial amount of Foreign Direct Investment (FDI) from the United States, the ED said in a statement.

 

ED investigation under the provisions of Foreign Exchange Management Act (FEMA), 1999 revealed that the company runs its business through a mobile application named SIMPL.

 

“It provides buy now pay later services which allow its customer to buy now and pay later in instalments. Further, it was learnt that One Sigma Technologies Pvt Ltd received FDI to the tune of ₹648.87 crore and issued convertible notes to the tune of ₹264.88 crore under 100 per cent automatic route by declaring its business activity as Benefits of Information Technology and other computer service activities,” the ED said. 

 

ED also pointed out that during its course of investigation, the business model and revenue generation model of One Sigma Technologies Pvt Ltd were examined and the same revealed that the company was into conducting business, which falls under financial activity.

 

However, according to AP (DIR Series) Circular No 8 dated October 20, 2016 issued by Reserve Bank of India (RBI), FDI in financial activities not regulated by any authority is to be brought under 100 per cent approval route.

 

The ED further noted that SIMPL has received FDI under automatic route and issued convertible notes under automatic route without obtaining prior approval from the Government of India, the statement added.