JPMorgan India unit to argue that any regulatory breach was technical

JPMorgan's Mauritius unit is likely to seek clarification from Sebi over alleged market manipulation, while avoiding an immediate appeal against the regulator's order

A JPMorgan Chase unit facing allegations of non-compliance from India’s market regulator is likely to contend that the issue was technical in nature rather than manipulative, people familiar with the matter said. 

The subsidiary — called Copthall Mauritius Investment — plans to seek clarifications but is unlikely to appeal the order for now, the people said, asking not to be named discussing information that isn’t public.  

That would suggest an effort to take a more conciliatory approach towards the Securities and Exchange Board of India (Sebi), who have become increasingly proactive in reforming the market and haven’t hesitated in penalising foreign firms active in its $5.1 trillion stock market.  

Sebi’s finding against the JPMorgan unit represents one of the first major actions over market manipulation involving a global firm since the regulator accused the Wall Street trading giant Jane Street Group of similar misconduct last year. The firm denied the charges and is pursuing an appeal in an Indian appellate court seeking access to additional documents. 

Last week, the regulator banned the JPMorgan Mauritius unit from its capital markets in the first enforcement action over alleged manipulation of the country's new closing auction for stock prices. 

The crackdown underscores the regulator's determination to ensure the success of the Closing Auction System. Copthall is separate from JPMorgan India Pvt., which is registered with Sebi as a stock broker and merchant banker. The order against the Mauritian entity, therefore, does not directly impact JPMorgan’s activities in India which are mostly conducted through its local unit.