Rajiv Jain’s GQG Partners settles US SEC charges with $ 5 mn penalty

The SEC charges against Florida-based GQG Partners, a registered investment adviser, were for entering into agreements with candidates for employment and a former employee that made it more difficult for them to report potential securities law violations to the SEC. Jain is the Chairman and Chief Investment Officer of GQG which has assets under management of $ 155 billion.

GQG Partners acquired stakes in various Adani group companies after the report by the US-based short seller Hindenburg Research, released in January 2023, alleged the Adani group was involved in corporate governance issues and misinterpretation of financial acumen, leading to a sharp correction in the stock prices of group companies.

GQG’s investment in four Adani companies totalled about Rs 15,400 crore as of March 2023. The market value of GQG’s investment in Adani companies has multiplied in the last one year.

According to the SEC’s order, from November 2020 through September 2023, GQG entered into non-disclosure agreements with 12 candidates for employment that prohibited them from disclosing confidential information about GQG, including to government agencies. “While the agreements permitted the candidates to respond to requests for information from the Commission, it required notification to GQG of any such request and prohibited responding to requests arising from a candidate’s voluntary disclosure,” SEC said.

The SEC’s order found that GQG also entered into a settlement agreement with a former employee whose counsel had told GQG that he or she intended to report alleged securities law violations to the Commission. “Specifically, the settlement agreement said that it permitted reporting possible securities law violations to government agencies, including the Commission,” it said.

“However, it also required the former employee to affirm that he or she had not done so, was not aware of facts that would support an investigation and would withdraw any statements already made that might support an investigation. These provisions violated the whistleblower protection rule,” SEC said.

“Whether through agreements or otherwise, firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” said Corey Schuster, Co-Chief of the Division of Enforcement’s Asset Management Unit. “Even agreements that contain carve-out language allowing people to voluntarily report to the SEC can be violative if restrictive language in a separate provision impedes voluntary reporting to the Commission staff.”