Vijay Mallya: Sebi bans Vijay Mallya from stock market for 3 years
The regulator also restricted Malia from interacting directly or indirectly with listed companies for three years.
SEBI’s investigation follows an investigation conducted by the UK’s Financial Conduct Authority (FCA) from January 1, 2006, to March 31, 2008.
The regulator’s probe found that Mallya used a foreign institutional investor (FII) sub-account, Matterhorn Ventures, as an investment vehicle to indirectly trade shares of his group companies Herbertsons’ and United Spirits in India.
Sebi alleged that the amount paid to Matterhorn Ventures was spent by Mallya to open up various channels of beneficiaries.
You have an account with UBS and route your funds indirectly through that account.
Indian stock market. These financial channels were used by Mallya to hide his real identity in the Indian stock market in the name of various foreign registered entities, Sebi said. Also, the FII was listed as a non-promoter public shareholder in Herbertson’s shareholding pattern, but the 9.98% stake held by Matterhorn Ventures actually falls under the promoter category, the regulator said.
On April 23, 2023, Sebi issued a show cause notice to Malia for engaging in fraudulent and unfair trade practices.
Mallya responded to SEBI that the show cause notices pertained to transactions and nominal monetary transactions that appear to be at least 15 years old.
“Therefore, the case of the Noticeee (Mallya) is enormous.
In his submission to Sebi, Mallya said, “There is a delay by SEBI in initiating any inquiry or investigation in respect of securities transactions and money transactions made over the said 15 years.”
The regulator disputes this, saying the investigation would require collecting cross-border regulatory data on foreign entities, and that the entire fact-finding process on the matter would be complex, tedious and time-consuming.
“I conceived a scheme whereby Noticee (Mallya) opened several accounts in the name of Bayside, Suncoast, Birchwood etc. with UBS to deal in shares of USL (United Spirits) and Herbertson, of which Noticee was the ultimate beneficiary. These three entities then transferred a total of $6.15 million to VNHL (Venture New Holding Limited), which in turn was the beneficiary,” the SEBI adjudicator said in his order.
Later, VNHL further transferred this amount to Matterhorn Ventures, which was then a listed company and immediately bought the shares of Herbertsons promoted by Mallya, Sebi alleged.
“…the notifier (Mallya) indirectly dealt in shares of its group companies in India namely Herbertsons and USL by indirectly using a sub-account of an FII namely Matterhorn Ventures as an investment vehicle and thereby raising funds for the said FII,” Sebi said.
As per the Securities and Exchange Board of India (SEBI) regulations, investment through FII route is permitted only for the purpose of enabling persons residing outside India to invest in the Indian securities market.
Sebi said, “… it is clearly established that the Noticee (Mallya) deliberately abused the FII route to invest surplus funds kept abroad and did not disclose this to the investors of these companies in India.”
