Sebi slaps Rs 1 crore penalty on Fidelity for violating FPI norms

Capital markets regulator Sebi on Friday slapped a penalty of Rs 1 crore on Fidelity Management & Research Company for flouting the FPI rules in the matter of Fidelity Investments Money Management.

In August 2021, designated depository participant JP Morgan Chase (JPMC) informed Sebi about the delay in intimation of change in material information of Fidelity Investments Money Management (FIMM).

FIMM had been registered as an FPI (Foreign Portfolio Investor) and the material information involved its merger with its affiliate Fidelity Management & Research Company (FMRC).

Following this, Sebi conducted an examination regarding the delay in intimation of change in material information.

The examination revealed that the merger of FIMM with FMRC led to the cessation of FIMM, the entity which was registered as FPI. However, after the merger, the surviving entity -- FMRC -- which had not obtained FPI registration, operated in the Indian securities market under the name, accounts and FPI registration of FIMM.

It was also observed that FMRC continued trading in securities market despite FIMM being merged into FMRC and being aware that FMRC did not have a FPI registration.

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In its order, Sebi's Adjudicating Officer Asha Shetty said, "I note that the Noticee (FMRC) has shown a lackadaisical approach in providing relevant information on time regarding material change which was delayed by about 1 year 6 months and 20 days, and noticee continued in carrying out FPI activities unabated to the tune of about Rs 8.79 crore during that period from the date the FIMM has ceased to exist and resultantly FPI status became a nullity." 

It was also noted that the noticee made 183 sell transactions and 344 purchase transactions during the period of January 2020 to July 2021.

"Further, the information regarding material information was not sent on Noticee's own volition but was done vide letter dated July 28, 2021 pursuant to the blocking of account by JPMC on July 20, 2021," Shetty added.

Therefore, FMRC failed to provide change in material information and continuing to trade without any valid FPI registration, and further failed to abide by provisions of the norms.

Meanwhile, JP Morgan Chase on Friday settled with markets regulator Sebi a case pertaining to alleged violations of FPI rules on payment of Rs 22.10 lakh towards the settlement amount in the same matter.

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