Anil Ambani barred from stock markets for a year

As per the Sebi consent order mechanism,such settlements are done without admission or denial of guilt.

“The settlement was made in the interests of investors to pre-empt unnecessary and time-consuming litigation,” said an ADAG spokesperson.

The other officials named in the order include Reliance Infra executive vice chairman Satish Seth and three directors — S C Gupta,Lalit Jalan and J P Chalsani.

The barring of companies and officials,however,does not apply to investments in mutual funds,primary market issues,buybacks and open offers. The case relates to a probe by Sebi in dealings in the shares of another Anil Ambani group firm,Reliance Communications,and investigations related to alleged violation of foreign investment and unfair trade practices norms.

“The investigations revealed that R-Infra and RNRL were prima facie responsible for misrepresenting the nature of investments in ‘Yield Management Certificates/ Deposits’ and profit & losses thereof in their Annual Reports for the years ending March 2007,March 2008 and March 2009; and misusing the framework of the Sebi (foreign institutional investors) Regulations,1995,” Sebi said in its order.

Sebi started the probe three years ago following information that the amounts raised towards external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) by the ADAG companies were allegedly misused by them to invest in the stock market and overseas investment vehicles were used for this purpose.

The regulator then conducted a probe into the dealings in Reliance Communications by ADAG companies. It had also banned two FIIs from issuing participatory notes for investment in Indian stocks.

Sebi said it agreed to settle the case after the two companies agreed to its terms,including the payment of settlement charges. The two companies would not be able to invest in any listed shares in the secondary market,other than mutual funds,until December 2012 and the individuals named in the case,which includes Anil Ambani,cannot invest in secondary market until December 2011,Sebi said.

As per the order,payment of settlement fees of Rs 25 crore each by the two companies was to be made jointly and severally by the company and directors. Sebi said the the directors have already remitted the settlement amount. “Directors have voluntarily made payment of entire settlement fees,with no burden on Reliance Infra,” the ADAG spokesperson said.

Commenting on the Sebi order,he said: “R-Infra has voluntarily settled SEBI show-cause proceedings of June 2010 against the company and its directors. Voluntary decision to not make investments in listed securities in secondary market (till next year by the company,and this year by directors) is to conserve resources for investment in own substantial projects,and will not impact growth prospects in any manner. Rotation of auditors is in accordance with risk management best practices,and already implemented.”

As per the Sebi order,the two companies would also have to implement a policy of rotating their statutory auditors and,therefore,the auditors as on March 2010 cannot be reappointed for a period of three years commencing from 2010-11.