Pleuri, the Mauritius-based investment vehicle, whose beneficial owner is Anil Ambani, Chairman, Anil Dhirubhai Ambani Group (ADAG), according to Britain's Financial Services Authority, figured in a major investigation by India's securities market watchdog, SEBI (Securities and Exchange Board of India) in 2009.
During the course of an investigation while proceeding against two foreign institutional investors (FII), Barclays Bank plc and Societe Generale of France, for wrong disclosure, SEBI discovered that Pleuri was the beneficial owner of participatory notes (PN) issued by the two FIIs.
The details are available in SEBI's orders against the two FIIs issued on December 9, 2009 (Barclays) and January 15, 2010 (Societe Generale). Incidentally, the two orders were issued by Dr. K. M. Abraham, a board member who was also one of the two members who passed the consent order in January, 2011, on a case against Mr. Anil Ambani, four other executives, and two ADAG companies for dealing in the shares of Reliance Communications.
PNs are offshore derivative instruments issued by FIIs to investment vehicles and hedge funds that are not registered with SEBI to trade in the Indian market.
These instruments are based on an underlying share.
The FII invests in the share in the domestic market and issues PNs to hedge funds based on such investment.
Interestingly, the underlying share for the PNs issued to Pleuri by Barclays and Societe Generale was Reliance Communication, part of the ADAG group.
That Pleuri is the beneficial owner of the PNs was not disclosed by the two FIIs to SEBI getting them into trouble with the regulator.
The PNs issued by Barclays and Societe Generale were routed to Pleuri through an investment vehicle called Hythe, registered with the UK market regulator and an FII, Opportunite S.A. SEBIs regulations require that when FIIs issue PNs, they should know the identity of the ultimate beneficial owner and such owner should be subject to regulatory oversight by a national body.
Barclays and Societe Generale ran afoul of SEBI on the two counts because they wrongly declared the beneficial owner of their PNs as Hythe and not Pleuri, which was really the case. Second, Pleuri, being a Mauritius-registered entity was not subject to any country's market regulation.