UK cries hoarse over Anil's Mauritius fund

UK's financial regulator Financial Services Authority has accused Anil Ambani led Reliance Group to have indirectly invested in a Mauritius-based fund which was used to make investments in one of its own companies, The Financial Times reported on 21 May. This is the same case that the Securities and Exchange Board of India had already settled in January 2011 when Anil Ambani and several other Reliance directors paid $10 million to Sebi.

Reuters reports, the use of foreign institutional investment account for investing in India is a breach of Indian law. While Anil Ambani has repeatedly denied any knowledge or authorisation of the transaction, FSA has not charged him under law as he is not party to the UK tribunal.

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However, a former UBS private banker, Jaspreet Ahuja, last year accepted a 150,000 fine for facilitating the investment. Interestingly, Ahuja's former manager, Sachin Karpe, has just lost his challenge against a 1.25 million pound penalty over the same events in a London tribunal.

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Jeff Glekin, Breakingviews columnist for Reuters raises the questions: "How did two companies run by Reliance founder Anil Ambani manage to invest $250 million in a related company without anyone in the firm realising? And why has the UK's financial regulator secured a conviction in a connected case, when India's regulator merely settled?"

Glekin's questions come at a time when perception of the Indian market has faced damage among foreign investors and capital flows for the country have dried up.

Glekin writes, "Investors are unlikely to get more detail from Ambani. And SEBI has settled and moved on. The mystery will die down, but the sense that India's market isn't quite working is hard to shake off."

Read the Reuters story here.