Sebi bars Mallya from accessing securities market for 3 years

Mumbai: The Securities and Exchange Board of India has barred former liquor baron Vijay Mallya from accessing the securities market for three years for routing funds to the Indian capital markets by using his overseas bank accounts with UBS.

The regulator has also restrained Mallya from associating with any listed company directly to indirectly for three years.

Sebi's investigation is based on the findings of Financial Conduct Authority, its counterpart in UK, for the period from January 1, 2006 to March 31, 2008.

The regulator's probe revealed that Mallya used a sub-account Mattherhorn Ventures, a foreign institutional investor(FII), as an investment vehicle to indirectly trade in the shares of his own group entities in India - Herbertsons and United Spirits.

The markets regulator alleged that the amount paid to Matterhorn Ventures were routed by Mallya by opening various beneficiary accounts with UBS and routing these funds through these accounts, indirectly, to the Indian securities market.

This financial route was taken by Mallya in the names of various overseas registered entities to conceal the true identity of his investments in Indian securities market, Sebi said.

Also, the said FII was shown as a non-promoter public shareholder in the shareholding pattern of Herbertsons, whereas Matterhorn Ventures' holding of 9.98% shares actually belonged to the promoter category, the regulator said.

On April 23, 2023, Sebi issued a show cause notice to Mallya for indulging in fraudulent and unfair trade practices.

Mallya responded to Sebi saying the show cause notice pertains to transactions and purported monetary dealings which appear to be atleast 15 years old. "Therefore, it is the case of the noticee (Mallya) that there has been an egregious delay in Sebi initiating an inquiry or investigation in relation to the aforesaid 15-year-old purported securities transactions and money dealings," Mallya said in his submission to Sebi.

The regulator countered it by saying its investigation required collection of data from cross border regulators with respect to foreign entities and that the entire fact finding process in the matter was complex, tedious and time consuming.

"I find that, in order to trade in the shares of USL and Herbertsons, the noticee (Mallya) devised a scheme of opening multiple accounts in various names with UBS including the names of Bayside, Suncoast, Birchwood, etc, of which the noticee was the ultimate beneficial owner.