Emerging India Focus Funds Settles Case with SEBI

Foreign portfolio investor Emerging India Focus Funds has settled a case pertaining to the alleged violations of FPI rules with capital markets watchdog Sebi after paying Rs 64.35 lakh as settlement charges.

In a corrigendum to its settlement order, Sebi on Tuesday said that the case concerns to non-compliance with the 'fit and proper' criteria for the period from October 13, 2022, to April 11, 2023.

The latest order came after the applicant filed an application with Sebi proposing to settle the proceedings initiated against it, "without admitting or denying the findings of facts and conclusions of law" through a settlement order.

The Securities and Exchange Board of India (Sebi) initiated adjudication proceedings against the applicant and issued a show cause notice in February for the alleged violations of FPI Regulations and Intermediaries Regulations.

Pending adjudication proceedings, Emerging India Focus Funds filed an application with Sebi and paid Rs 64.35 lakh on November 13 to settle the alleged violations.

"In view of the acceptance of the settlement terms and the receipt of settlement amount ...by Sebi, the instant adjudication proceedings initiated against applicant vide SCN (show cause notice) dated February 29, 2024, is disposed of," Sebi said in its order passed on Monday.

The SCN was issued to the applicant on account of revocation of license of its controlling shareholder -- Emerging India Fund Management Ltd-- by the Mauritius financial regulator Financial Services Commission (FSC) after which the applicant was not in compliance with the 'fit and proper' criteria for the period from October 13, 2022 to April 11, 2023.

Further, the applicant failed to forthwith inform Sebi and the Designated Depository Participant about the change in its eligibility status.

However, EIFF replaced the controlling shareholder with a new fit and proper entity only in April 2023, sources said.

Between April 2022 and April 2023, therefore, EIFF was in breach of Sebi regulations, and a show cause notice was duly served on them. This has now been duly settled.

Notably, EIFF has only invested in mutual funds in India since November 2021.

Emerging India Focus Funds was named in the Hindenburg Research report, which which alleged that the fund was used to inflate the volume as well as price of the Adani Group companies.

Sources close to the development said that the case that has been settled with Emerging India Focus Funds (EIFF) has nothing to do with the Adani or Hindenburg report related to enforcement actions undertaken by Sebi.

Specifically, this case does not form a part of the 24 cases that were reported to the expert committee set up by the Supreme Court after the Hindenburg Report of January 2023.