Barclays banned from ODI trade

The Securities and Exchange Board of India (SEBI) has suspended UK bank Barclays from dealing in products that allow foreign investors to buy Indian stocks. SEBI has issued Barclays an order not to issue, subscribe or transact in any offshore derivative instruments (ODIs) until it satisfies SEBI that it has adequate systems and controls in place to ensure accurate reporting of its ODI transactions.

The Indian securities regulator has accused the bank of not correctly disclosing details of how its Indian investment products operate. Barclays is reportedly cooperating with SEBI to resolve the matter.

“The foremost implication of this ban is that it serves as a precedent to the other banks and foreign institutional investors (FIIs) for carrying out all reporting requirements of the FII regulations with utmost prudence,” explained Shardul Thacker, a partner at Mulla & Mulla & Craigie Blunt & Caroe. “The government and SEBI had conjunctively, at some point prior to the recession, tightened the FII regulations with a view to keep a tab on all back-to-back ODI issues, more particularly participatory notes, so that the regulator could identify the ultimate buyer of the underlying scrip, which is traded on the Indian bourses.