SEBI Bans Vijay Mallya for 3 Years Over Secret Fund Routing Through Foreign Investment Channels

India’s market regulator, the Securities and Exchange Board of India (Sebi), has banned Vijay Mallya from the securities market for three years. This decision came after Sebi found that Mallya had secretly funneled funds into the Indian market through complicated transactions to hide his identity.

Anitha Anoop, a senior official at Sebi, said that Mallya, the former head of United Breweries and major shareholder of United Spirits Ltd (USL), had used bank accounts at UBS AG London to trade shares of his own companies indirectly. This was done through the Foreign Institutional Investment (FII) route.

“Sebi considers these actions fraudulent and harmful to the market’s integrity,” the order stated.

Previously, Sebi had also banned Mallya from the securities market for three years starting June 1, 2018, due to similar issues with manipulating activities and improper transactions in USL shares.

In the latest order, Sebi pointed out that Mallya had continued to engage in manipulative and fraudulent practices, leading to the extension of his ban for another three years.

Sebi started investigating after receiving information from the Financial Services Authority (FSA). The investigation revealed that Mallya used Matterhorn Ventures, an FII sub-account registered under Matterhorn Advisory Singapore Pte Ltd, to trade shares of his group companies, Herbertsons and USL, in India. The funds were routed through various UBS accounts and then moved into the Indian market.

The order highlighted that Mallya controlled multiple accounts, including Bayside, Suncoast, and Birchwood. These accounts transferred a total of $6.15 million to Venture New Holding Ltd, owned by Mallya, which was then used to buy 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.

Anitha Anoop emphasized that Mallya’s misuse of the FII regulations harmed investors.

“Mallya’s actions in abusing the FII framework and trading securities of his group companies in India, indirectly, were fraudulent and manipulative. These actions were detrimental to investors and intended to deceive market participants, violating the PFUTP Regulations and SEBI Act,” the order stated.