The Sebi ban follows an investigation revealing that Mallya routed funds into the Indian market through complex transactions, masking his identity and engaging in manipulative and fraudulent activities involving his group companies.
India’s markets regulator, Securities and Exchange Board of India (Sebi), issued an order Friday barring fugitive businessman Vijay Mallya from accessing in the securities market for three years. The action follows findings that Mallya routed funds into the Indian securities market through complex transactions designed to mask his identity.
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According to Anitha Anoop, chief general manager at Sebi, Mallya, former head of United Breweries and majority shareholder of United Spirits Ltd (USL), orchestrated a scheme to indirectly trade shares of his own companies. The transactions were layered through bank accounts at UBS AG London, utilizing the Foreign Institutional Investment (FII) route.
“Such acts are not only fraudulent and deceptive but are a threat to the integrity of the securities market,” as per the Sebi order.
This isn’t Mallya’s first sanction; Sebi had previously barred him from accessing the securities market for three years, starting 1 June 2018, for manipulating activities and improper transactions in the shares of USL.
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In Friday’s order, Sebi emphasized that Mallya had been involved in manipulative and fraudulent activities and was engaging in unfair trade practices, which constituted a violation of securities laws. This led the regulator to extend his market ban for another three years.
The regulator had initiated an investigation suo motu based on information from the Financial Services Authority (FSA). The probe revealed that Mallya used Matterhorn Ventures, a registered sub-account of an FII—Matterhorn Advisory Singapore Pte Ltd—to indirectly trade in the shares of his group companies, Herbertsons and USL, in India. The funds were routed through various beneficiary accounts with UBS and then funneled into the Indian securities market.
The Sebi order highlighted that Mallya was the ultimate beneficial owner of multiple accounts, including Bayside, Suncoast, and Birchwood. These entities transferred a total of $6.15 million to Venture New Holding Ltd, which Mallya also owned. The funds were immediately used to purchase shares of Herbertsons. After Herbertsons merged with USL, Matterhorn Ventures received 633,333 shares of USL in exchange for 950,000 shares of Herbertsons, at a 2:3 exchange ratio, in 2006.
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Sebi’s Anoop noted that Mallya’s abuse of the FII regulations framework was harmful to investors.
“I find that the said acts of Mallya in abusing the framework of the FII Regulations and dealing in securities of listed companies of his group of companies in India, indirectly, in a fraudulent manner and by employing a manipulative and deceptive artifice, thereby, indulging in purchase and sale of securities of Herbertsons/USL clearly was detrimental to the investors at large and was with an intention to deceive the market players in violation of the PFUTP Regulations and SEBI Act,” the order read.
