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Sebi bars UBS Securities for one year
18 May, 2005
BY OUR BUSINESS CORESPONDENT
Sebi has banned foreign institutional investor UBS Securities Asia from issuing or renewing partcipatory notes issed by it for a periof od one year. Sebi has also asked UBS to folow the highest standards of due diligence to be followed by foreign institutional investors in India.
The Sebi order also applies to affiliates and agents of UBS Securities in India.
The move by the Indian capital market regulator follows its investigation into the market crash of May 17, 2004, when the Sensex sank by 842 points intra-day. The crash happended amid the loss of NDA government in the elections and fears of a rollback of economic reforms with the ascent of the Congress and Left parties.
The May 17 crash - often called Black Monday - resulted in the wiping out of enormous investor wealth. Several brokers and small investors lost their life's investments in the stampede.
Immediately after the crash - the largest in the history of Indian capital markets - Sebi asked for information on the sellers in market from the stock exchanges, in an attempt to spot mischief-makers. The investigation found that UBS was one of the biggest sellers that day, with sales over Rs 188 crore. Sebi asked for detailed information on UBS clients, on whose behalf it was selling. Sebi had issued notices to 12 entities, which it susected of being involved in the market crash.
The Sebi order claims that UBS did not cooperate fully with the Sebi probe and tried to suppress material facts. No cooperating with the regulatr is a serious offence in many countries, incuding India. The Sebi order details the correspondence between the stock market regulator and UBS, to highlight how the FII stonewalled requests from the regulator.
However, it is important to note that the Sebi order on UBS is not for market manipulation or being involved in the crash.
In the year following the crash, the market has regained its losses and risen steadily. However, on the day the Sebi order was announced, the Bombay Stock Exchange index (Sensex) shed 62 points. The central government led by the United Progressive Alliance, a coalition of Congress and the Left-minded parties has put reforms on track, much to the relief of Indian stock markets.
BY OUR BUSINESS CORESPONDENT
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