SAT sets aside SEBI order on Goldman Sachs

The Securities Appellate Tribunal (SAT) has set aside a SEBI order penalising investment firm Goldman Sachs Investments (Mauritius) Ltd for issuing off-shore derivative instruments to an overseas corporate body.

Allowing the appeal by Goldman Sachs, SAT observed that the Securities Exchange Board of India's (SEBI) regulations does not prohibit FIIs or their sub-accounts from dealing in ODIs with OCBs.

SEBI, which used the impugned order to monitor the investments by FIIs through the derivative instruments, had directed them to report the issuance of ODIs. The market regulator had also asked FIIs to furnish an undertaking that they have not issued any ODI to Indian residents/ NRIs/ PIOs/OCBs. They were also required to report the dealings in ODIs every fortnight.

SEBI had held Goldman Sachs guilty of non-compliance of its prescribed guidelines as also for failing to furnish an undertaking to cease dealing in ODI with OCBs. SEBI imposed a fine of Rs1 crore on Goldman Sachs through an order passed in September 2006, for not furnishing an undertaking that they had not dealt in ODIs with OCBs.

Goldman Sachs had issued ODI to Magnus Capital Corporation Ltd (MCCL) in November 2002, which was an OCB, the SEBI said in a letter to the Reserve Bank of India (RBI).

''The board is directed not to insist on the undertaking prescribed by the revised reporting format,'' SAT said in its order setting aside the SEBI order.