US probing Indian funds and brokers

seclogo copywebWASHINGTON/NEW DELHI: Many Indian funds and portfolio managers from India are believed to have come under scanner in the US for serving clients there without the required regulatory approvals for such activities.
These entities also include those soliciting investments from institutional and individual investors in the US, including Non-Resident Indians (NRIs), in funds and portfolio products involving arts, real estate, commodity and various other non-equity assets, sources said.
The US market regulator SEC recently charged four Indian brokerages –
Ambit Capital, Edelweiss, JM Financial and Motilal Oswal – for providing unauthorized broking services to the American clients.
While the Securities and Exchange Commission (SEC) agreed to settle the charges against these brokerages after a payment of more than USD 1.8 million (about Rs 10 crore) by them, the US market regulator might take stricter action against other entities from India being probed by it, sources said.
In the case of these brokerages, the quantum of business provided by them to their US clients was not big and they also readily agreed to take corrective steps after being contacted by the SEC regarding their possible violations.
The SEC is also probing the role of some other Indian brokerage firms for potential violation of similar nature.
However, in the case of the portfolio managers and funds, the violations are said to be of much bigger in nature, a senior official said.
The US regulator has also contacted financial regulatory authorities in India with regard to its probe into Indian entities, while notices have also been served to some of the companies suspected to be serving the US clients without proper authorization in the country, the official added.
However, he declined to name the entities, saying it might come in way of the probe and could also affect their business interests in case they are not found to be guilty.
In its order on November 27, SEC had said that the four financial services firms were providing brokerage services to institutional investors in the US without being registered with the SEC as required under the federal securities laws.
Despite being unregistered broker-dealers, the four companies engaged the US investors here through sponsored conferences, regular travel of their employees to meet the US investors, traded securities of India-based issuers on behalf of US clients and participated in securities offerings from India-based issuers to US investors, SEC said.
In their respective settlements, the firms agreed to be censured while neither admitting nor denying the SEC’s charges. -PTI

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