Sebi consent order comes with tough riders.

The Securities & Exchange Board of India (Sebi) has barred Anil Ambani and four other directors of Reliance Infrastructure (R-Infra) and Reliance Natural Resources (RNRL) from investing in listed securities until December this year. This is part of a settlement for misusing funds raised abroad.

As part of a consent order, the top brass has also paid Rs 50 crore as settlement charges.

Apart from Ambani, the other executives named are R-Infra’s CEO & Whole-time Director Lalit Jalan, Director (operations) S C Gupta and Vice-Chairman Satish Seth, as well as Reliance Power CEO J P Chalasani. The entities will, however, be allowed to invest in mutual funds and can also subscribe to primary issuances, buybacks and open offers.

This is one of the highest-ever consent charges imposed by Sebi to settle a regulatory probe. Also, the tough conditions enforced on some of the top executives of the prominent industrial group, which comprises large listed entities, is unprecedented.

Furthermore, R-Infra and RNRL have been barred from investing in listed securities until December 2012. The companies have also been directed to implement a policy of rotating their statutory auditors.

Sebi last June initiated investigations into R-Infra and RNRL after allegations they had used loans raised abroad to invest in the stock market through overseas companies. RNRL later merged with Reliance Power.

An R-Infra spokesperson stated in an emailed response: “Reliance Infra has voluntarily settled Sebi show-cause proceedings of June 2010 against the company and its directors… In accordance with Sebi consent mechanism, the settlement is without admission or denial of guilt.”

“A voluntary decision to not make investments in listed securities in (the) secondary market (until next year by the company, and this year by directors) is to conserve resources for investment in its own substantial projects, and will not impact growth prospects in any manner,” stated the spokesperson.

According to the capital market regulator, it received information that money raised through external commercial borrowings or foreign currency convertible bonds by Ambani-owned Reliance Group (earlier known as Anil Dhirubhai Ambani Group) had been invested in stock markets.

Sebi investigations revealed that R-Infra and RNRL misrepresented the nature of investments in their annual reports for the financial years ended March 2007, March 2008 and March 2009.

On the issue of rotating auditors, the company has said that it has been “already implemented”. Sebi has clearly said that the auditors of March 2010 cannot be re-appointed for a period of three years commencing 2010-2011.

The regulator has also said that the consent charges would remain applicable on surviving corporate entities, if R-Infra or RNRL undergo any change due to a merger, amalgamation or restructuring. RNRL was merged with Reliance Power in July 2010.

source: Business Standard

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