Last year, we had discussed a decision of the Supreme Court which clarified that the Securities and Exchange Board of India (SEBI) had jurisdiction over the issuance of global depository receipts (GDRs), due to which lead managers to such issuances would also come within the purview of SEBI if their actions were found to violate Indian securities law. This involved PAN Asia Advisors Limited and its promoter, Mr. Arun Panchariya (AP).The matter had gone up to the Supreme Court only on the issue of jurisdiction, which it settled. However, SEBI had earlier imposed sanctions on PAN Asia and AP in connection with their actions relating the GDR issue of several companies. Against this order, PAN Asia and its promoter appealed to the Securities Appellate Tribunal (SAT). In an orderpassed on October 25, 2016, SAT upheld SEBI’s order.The relevant facts as set out by SAT are that PAN Asia was a lead manager to several companies in connection with the issuance of GDRs by such companies. In one of the cases (involving Asahi Infrastructure & Projects Ltd) that SAT discusses in detail as the modus operandi, an overseas company (Vintage) owned by AP obtained a loan from a bank in order to acquire the GDRs to be issued by Asahi. In addition, Asahi itself provided some form of security to the bank towards repayment of the loan by Vintage. Following the seemingly successful issuance of the GDRs, there was heavy trading in Asahi’s scrip. As SAT summarizes: “… AP, as Managing Director of PAN Asia got the GDRs issued, as Managing Director of Vintage subscribed to the GDRs and thereafter transferred the GDRs to the entities controlled by AP and on conversion of GDRs into equity shares ensured that the said equity shares of the issuer companies are bought by the entities with whom AP was connected.”The question before SAT therefore was whether PAN Asia Advisors and AP have violated the provisions of the Securities and Exchange Board of India Act, 1992 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (the PFUTP Regulations). The concern as articulated by SEBI was that PAN Asia and AP had made it appear to investors in India that foreign investors had found Asahi to have great potential by subscribing to the GDR issuance of the company.In considering whether SEBI was justified in holding the PAN Asia and AP committed fraud on the investors in India, SAT noted as follows:21. Thus, instead of ensuring that the foreign investors subscribe to the GDRs of Asahi, AP as Managing Director of PAN Asia planned to subscribe to the GDRs of Asahi through Vintage and in fact as Managing Director of Vintage took loan of 5.98 Million USD from Euram Bank for subscribing to the GDRs of Asahi and made Asahi to pledge to the Euram Bank the GDR subscription amount of 5.98 Million USD as security for the loan taken by Vintage. Similar modus operandi was adopted in case of other issuer companies. Thus, the investors in India were made to believe that in the global market the issuer companies have acquired high reputation in terms of investment potential and hence the foreign investors have fully subscribed to the GDRs, when in fact, the GDRs were subscribed by AP through Vintage which was wholly owned by AP. In other words, PAN Asia as a Lead Manager and AP as Managing Director of PAN Asia attempted to mislead the investors in India that the GDRs have been subscribed by foreign investors when in fact the GDRs were subscribed by AP through Vintage. Any attempt to mislead the investors in India constitutes fraud on the investors under the PFUTP Regulations.Such a modus operandi was found to create an artificial impression in the minds of investors that the GDRs of Asahi had commanded considerable interest. This misled the investors, as PAN Asia and AP had attempted to commit fraud on the investors in India. For these reasons, SEBI’s order debarring PAN Asia and AP from rendering services in connection with the securities market, and prohibiting them from accessing the capital market directly or indirectly for a period of 10 years, was upheld.While the SAT order is largely based on the facts of the case, it has accepted the jurisdiction conferred upon SEBI (and consequently SAT) to decide over matters involving GDRs. Ultimately, jurisdiction had to be exercised as the actions of the parties had a direct impact on the Indian securities market, and SEBI’s role relates to protection of investors in this market.