This is the second foreign entity after Barclays to come under Sebi scanner for similar irregualarities.
“Societe Generale is required to show cause as to why appropriate proceedings including cancellation of its certificate of registration as an FII should not be initiated,” Sebi said. Sebi also banned Societe Generale of France from issuing any fresh overseas derivative instrument (the financial instrument) for providing wrong information about one Hythe Securities Limited to which it issued such instruments. “I hereby direct Societe Generale... not to issue/subscribe or otherwise transact in any fresh/new ODI till such time it provides a true and correct reporting of its ODI transactions to Sebi,” said K M Abraham, whole time member of Sebi, in his order.
The underlying securities for which ODIs were issued were of Reliance Communications. Sebi said regulator issued the order and the show cause notice as the French firm could not provide information about the final beneficiary of ODI and in fact gave wrong information that Hythe Securities is the final beneficiary.
Earlier, Sebi had directed Barclays not to issue fresh ODIs after it provided wrong information. Barclays had entered into an ODI contract with UBS with Reliance Communications shares as underlying securities.
Sebi said it is evident that Societe Generale had failed to report the ultimate beneficiaries of ODIs. It said that ODIs were subsequently issued downstream to Opportunite SA and then to Pluri. “ODIs were issued afresh overlooking the regulatory requirements...It (Societe Generale) further continued to misrepresent that the ODIs were not issued back to back to any other entity,” Sebi said. It is a major lapse on the part of the French FII as it was not able to adentify the beneficial owners even after the continuous advice by Sebi and instead wrongly reported that Hythe was the true beneficiary, contrary to facts, Sebi observed.