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Sebi moves to choke Mauritius conduits

New Delhi, Dec. 12: The Securities and Exchange Board of India (Sebi) today signed an agreement with the market regulator of Mauritius for firmer control of the capital market.

The Memorandum of Understanding (MoU) signed with Financial Services Commission (FSC) of Mauritius will ensure ‘smoother’ flow and ‘exchange’ of information on illegal market practices and ‘enforce compliance with the respective country’s securities law.’

Government officials and financial analysts said the agreement would deter traders from routing their money (earned by illegal market practices) to Mauritius. “Earlier, Mauritius was considered a ‘safe-haven’ for these activities since the Mauritius law prevented sharing of information with foreign regulators,” a government official said.

The MoU “…will establish a framework for mutual assistance — in discovery of taking action against market manipulation and other fraudulent practices in securities dealings; enforcement of laws relating to these areas; supervising and monitoring securities and futures market and clearing and settlement activities and their compliance with the relevant laws and regulations, takeovers and mergers.”

“Under this protocol, we can ask FSC to furnish us with specific details on illegal market practices and take appropriate measures...this will assist us to investigate live cases of securities scam of 2000-01,” Sebi chairman G. N. Bajpai told a news conference.

“Earlier, we had an informal agreement with FSC and sometimes it was difficult to get the necessary information since there were legal impediments to information sharing.”

Mauritius minister for economic development, Sushil Khushiram, said there would soon be an agreement with Sebi on prevention of money laundering. “India is an important market for us since it contributes around 1 per cent of our GDP of $ 5 billion.”

This is the third in a series of agreement between Sebi and the market regulator of another country.

“We have a similar agreement with the US and Malaysia,” Bajpai said and added the agreement was to formalise protocol between two countries.

The government has recently introduced the Sebi Act 2002 to give the capital market regulator greater powers to deal with market shysters and help restore investors’ confidence in a market that has been witness to a series of scams from the early 90s to the recent past.

Bajpai said the lowering of the registration fees for foreign financial institutions (FII) to $ 5,000 from the earlier $ 10,000 should improve the sentiment of FIIs.

“Hopefully, it should also improve market sentiments...this was never a revenue earning source for us. It was only to seek serious participants but since the FIIs saw this as an impediment for investing we have decided to lower it.”

“We will introduce the T+2 settlement scheme in April 2003,” Bajpai said.

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