Sebi jurisdiction upheld by SC in offshore markets with regard to GDRS by firms

After the order of Supreme Court Market regulator Sebi received a shot in the arm on Monday to regulate the creation and issuance of Global Depository Receipts by companies in the offshore markets.

It take action against the companies for manipulation in global securities.It rejected the Securities Appellate Tribunal™s (SAT) majority decision of September 30, 2013, barring Pan Asia Advisors .

The conclusion of the majority judgment of SAT was that it is the RBI and/or the ministry of finance, government of India which have exclusive jurisdiction in respect of the issuance, trading and conversion of GDRs into shares abroad and such issues cannot come within the purview of the Sebi Act thereby ousting the jurisdiction of Sebi.

Sebi had told the court it had received alerts about large-scale off-market transactions in its integrated market surveillance system regarding trading in scrips of certain companies. It was also observed that such conversions had occurred within a short period after the issue of GDRs by those companies.

As per the Foreign Currency it does not extend to transactions executed by promoters in countries with respect to the issuance of GDRs and Ordinary Shares (via depository receipts mechanism) scheme, 1993, issued by the finance ministry.

The master circular on foreign investment issued by the RBI periodically, adding that Sebi has not framed norms governing GDRs for the simple reason that it lacks jurisdiction to do.

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eMinds Legal is a Corporate Law Firm based in Gurgaon, India specializing in Corporate Legal, Corporate Secretarial and Compliance. The Firm comprises of a team of Corporate Lawyers and Company Secretaries with in-depth subject matter knowledge and participative industry experience of over 15 years.

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