SAT Disposes of Appeals by Five FPIs After SEBI Agrees to Share File Noting

The Securities Appellate Tribunal (SAT) on Monday disposed of appeals filed by five foreign portfolio investors after the Securities and Exchange Board of India (SEBI) agreed to provide them with a true copy of a file noting prepared by its adjudicating officer. 

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The five FPIs Albula Investment Fund, Asia Investment Corporation (Mauritius), LTS Investment Fund, Cresta Fund and APMS Investment Fund had sought access to the complete opinion formed by SEBI’s adjudicating officer under Rule 4(3) of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995. 

The funds had earlier been named in the Hindenburg Report and have figured in regulatory scrutiny involving offshore investors with substantial holdings in Adani Group companies. 

SEBI Agrees to Provide Complete File Noting 

The dispute before SAT centred on the document prepared under Rule 4(3). The provision requires an adjudicating officer, after considering a noticee’s response to a show-cause notice, to form an opinion on whether an inquiry should be held. 

The FPIs had approached the tribunal after receiving a paraphrased version of the opinion from SEBI. They sought the complete opinion along with the reasons behind the decision to proceed with an inquiry. 

During Monday’s hearing, SEBI informed the tribunal that it was prepared to provide a true copy of the relevant file noting. The submission was made without prejudice to the regulator’s rights and contentions, as well as any position it may take on the issue. 

Following SEBI’s submission, counsel representing the FPIs informed the tribunal that they were satisfied with the arrangement. 

With the disclosure issue addressed, SAT found that nothing further remained in the appeals and disposed of the cases. 

Earlier Appeals Were Withdrawn 

SEBI had previously raised a preliminary objection over whether the appeals were maintainable. 

The regulator’s position was that it had already provided the FPIs with a paraphrased extract of the opinion. It had also maintained that an opinion formed under Rule 4(3) was not an order and therefore could not itself be challenged in the manner sought by the funds. 

The five FPIs later withdrew those appeals, with permission to file fresh appeals incorporating the required amendments. 

FPIs Had Figured in Wider Regulatory Scrutiny 

The five funds have been part of wider regulatory scrutiny involving foreign portfolio investors that held substantial positions in Adani Group companies. 

In 2021, SEBI sought information regarding the ultimate beneficial owners of FPIs holding shares in six Adani Group companies. Albula Investment Fund, Cresta Fund and APMS Investment Fund were among the entities covered by that exercise. 

Separately, a group of Adani-linked FPIs had sought to settle regulatory proceedings with SEBI. 

SAT Makes No Finding on Underlying Allegations 

Monday’s proceedings were limited to the dispute over disclosure of the Rule 4(3) opinion and the associated file noting. 

SAT did not adjudicate on the underlying allegations concerning the five FPIs. The tribunal also did not make any finding on their conduct in relation to Adani Group companies. 

The disposal of the appeals therefore closes the specific disclosure dispute after SEBI agreed to provide the requested file noting, without deciding the broader regulatory issues involving the funds.