Here is an interesting question: can you be sanctioned by a regulator in another country for doing the things you are qualified to do in your own? The US Securities and Exchange Commission (SEC) thinks so. It has penalised Indian brokerage firms — JM Financial, Motilal Oswal, Edelweiss Financial Services and Ambit Capital — for selling Indian equities listed on Indian stock exchanges to US institutions without being registered with the US regulator.
The rules in the US prohibit firms from selling securities to investors without being registered broker-dealers; but most firms tend to believe that the rule applies to retail investors, not institutional ones — the so-called qualified institutional buyers.
The firms paid up the $1.8 million fine without a murmur — taking on the SEC is hard to do when the letter of the law has been violated. What worries some other firms is whether regulators in other countries will take a similar line. That makes securities firms feel very insecure.
(This story was published in Businessworld Issue Dated 10-12-2012)
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