SAT moots penalty on UBS

The Securities Appellate Tribunal (SAT) on Monday suggested to market regulator Sebi to consider plea bargaining and a penalty of Rs 500000000 on UBS Securities Asia Limited a foreign institutional investor (FII) which was banned from issuing participatory notes for one year. While hearing UBS Asia’s appeal against Sebi’s order, SAT presiding officer Justice Kumar Rajaratnam said the regulator could consider process akin to plea bargaining as a innovative step to put an end to endless litigation since there was no allegation of manipulation. Coming down strongly on those allegedly involved in May 17, 2004 market crash, Sebi in May this year had barred UBS Securities Asia from issuing participatory notes (offshore derivative instruments) for underlying Indian securities for one year. UBS has totally failed to discharge its obligations to regulatory requirements, with a design to withhold critical information for stultifying the investigation, Sebi had said. SAT presiding officer said the capital market watchdog could also consider Rs 500000000 penalty for UBS in lieu of any other proceedings. The Securities and Exchange Board of India order passed against UBS in May 2005 was prohibitive in nature. On May 17, 2004, there was a steep fall in the Indian stock market with the Sensex falling by 567.74 points due to uncertainties over the government formation. Plea bargaining is a negotiation in which defendant agrees to enter a plea of guilty to a lesser charge and the prosecutor agrees to drop a more serious charge. UBS Securities Asia had strongly pleaded ‘‘not guilty’’ in the Securities Appellate Tribunal (SAT) on Monday. The Sebi order said the FII has been restrained as it has failed to provide information related to its clients required by it in the course of investigation. It also said UBS had not complied with guidelines pertaining to Know Your Client (KYC).