Mumbai: Hong Kong-based hedge fund Factorial was on Friday allowed to access the Indian capital markets, more than year after it was banned by the regulator Sebi in an alleged insider trading case.
The ban on Factorial, founded by an Indian-origin banker Barun Agarwal, has been revoked pursuant to Sebi failing to issue a show-cause notice to the fund within a timeframe granted by the Securities Appellate Tribunal two months ago.
In separate circulars, the two exchanges -- BSE and NSE -- said that SAT has now clarified in a fresh order that Sebi's orders against Factorial "have come to an end and consequently Apellant would be entitled to access the Indian securities market in accordance with the law."
Sebi had first passed an interim order against Factorial on June 6, 2014, followed by a confirmatory order on October 16, 2014, wherein it had restrained Factorial Master Fund from Indian securities market (including through Offshore Derivative Instruments).
Factorial had approached SAT against Sebi order, following which the Tribunal on May 8, 2015 asked Sebi to complete its probe and issue a show-cause notice within two months.
SAT had also ruled that the Sebi order would come to an end if the regulator fails to comply with its directions.
Upon completion of this period on July 7, 2015, Sebi approached SAT and informed the bench that it could not issue show-cause notice within the stipulated time.
Consequently, Sebi's interim and confirmatory orders "have come to an end" and Factorial would be entitled to access the Indian securities market in accordance with law, the regulator's counsel informed the Tribunal.
The Sebi counsel, however, submitted that the "failure to issue show-cause notice within the stipulated time should not come in the way of Sebi in issuing a show-cause notice to the appellant hereafter, if any new facts adverse to the Appellant come to the knowledge of Sebi."
Accordingly, SAT has now ruled that Sebi's orders against Factorial have come to an end and the fund "would be entitled to access the Indian securities market in accordance with law".
"It is further clarified that failure on part of Sebi to issue show-cause notice within the time stipulated in the order dated May 8, 2015, shall not come in the way of Sebi in issuing a show-cause notice if any new facts adverse to the Appellant come to the knowledge of Sebi," SAT said in its latest order.
Sebi had earlier alleged Factorial, in its dealings in shares of L&T Finance, was privy to Unpublished Price Sensitive Information before executing its trades, "is based on mere presumption and without any sustainable basis".
A probe by the capital markets regulator had found that Factorial was involved as potential investor in the
market gauging exercise undertaken by Credit Suisse as 'Seller Broker' of L&T Finance for its Offer for Sale (OFS) in March.
