Emerging India Focus Funds pays Rs 64.35 lakh to settle allegations of FPI, intermediaries norms violations

Pending Adjudication Proceedings, the entity proposed to settle the instant proceedings initiated against it through an application dated May 8, 2024

Emerging India Focus Funds has paid Rs 64.35 lakh to settle allegations of Foreign Portfolio Investor (FPI) Regulations and of Intermediaries Regulations.

In an order dated November 18, the Securities and Exchange Board of India (SEBI) said that the entity settled the adjudication proceedings without admitting or denying the findings of facts and conclusions of law.

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SEBI had started adjudication proceedings against the fund for the following alleged violations:

a) Regulation 22(1)(c) and (h) of SEBI (Foreign Portfolio Investors) Regulations, 2019 (hereinafter referred to as “FPI Regulations”).
b) Clause 6 read with clause 3(b)(iii) of Schedule II read with regulation 7 of SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as “Intermediaries Regulations”)
c) Clause 6 of the Third Schedule of Code of Conduct of regulation 23 of FPI Regulations.

Under the FPI Regulations 22 (1) (c) mandates informing relevant authorities about any material change in the information including any direct or indirect change in its structure or ownership or control or investor group previously furnished by him to the Board or designated depository participant;

FPI Regulations 22 (1) (h) states that the entity shall be be a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.

A source told Moneycontrol the details of the case: "The license of the controlling shareholder of Emerging India Focus Funds (EIFF) was revoked in April 2022 by the Mauritius financial regulator (FSC). SEBI regulations require that persons holding controlling interest in an FPI should be ‘fit and proper’. After the action by the FSC, this was no longer the case. However, EIFF replaced the controlling shareholder with a new fit and proper entity only in April 2023.

"Between April 2022 and April 2023, therefore, EIFF was in breach of SEBI regulations, and a show cause notice was duly served on them."

SEBI's showcause notice dated February 29, 2024, was issued to the fund. Pending Adjudication Proceedings, the entity proposed to settle the instant proceedings initiated against it through an application dated May 8, 2024.

The order stated, "After attending meeting with the Internal Committee of SEBI on August 6, 2024 in terms of the Settlement Regulations, Applicant (Emerging India Focus Funds) vide letter dated August 13, 2024, proposed revised settlement terms. The High Powered Advisory Committee (hereinafter referred to as 'HPAC') in its meeting held on August 28, 2024, considered the settlement terms proposed and recommended that the case may be settled upon payment of INR 64,35,000/- (Rupees Sixty Four Lakh and Thirty Five Thousand only) by the Applicant as settlement amount towards the settlement terms."

The Panel of Whole Time Members of SEBI approved the recommendation of the HPAC on October 28, 2024.

A source told Moneycontrol that, since November 2021, EIFF has only invested in Mutual Funds in India.

Emerging India Focus Funds was named in the Hindenburg Report, which alleged that the fund was used to inflate the volume and price of some of the Adani-listed companies. Sources told Moneycontrol that the current settlement order has nothing to do with the short-seller's report and the allegations made therein.

As a source said, "For avoidance of doubt, the case that has been settled with Emerging India Focus Funds (EIFF) has nothing to do with the Adani/ Hindenburg report related 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 Hon’ble Supreme Court after the Hindenburg Report of January 2023."