UBS to appeal against 1-year ban

By agencies   |   Wednesday, 18 May 2005, 19:30 IST
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MUMBAI: Swiss banking group UBS said it would appeal a one-year derivatives trading ban imposed on it by India's stock market regulator which blamed it for a massive stock market crash a year ago. "UBS does not believe the description of its conduct or intent as contained in the Securities and Exchange Board of India (SEBI) judgment is fair," UBS spokesman Mark Panday said in a statement on Wednesday. "UBS is seeking legal advice and intends to appeal against the regulator's decision." The banking group is among the top 10 foreign stock brokers operating in India and SEBI's order comes as Indian regulators aim to instill greater domestic and foreign investor confidence in the country's share market. The ban Tuesday came on the first anniversary of the biggest drop ever in the benchmark Bombay Stock Exchange Sensex index in which it fell 11.1 percent or 567.74 points to 4,504.20 points on what was called "Black Monday." The SEBI Tuesday followed an investigation into the May 17, 2004 market crash in which the regulator found that UBS trades could have increased "selling pressure for no reason." The fall came amid fears the newly elected Congress Party-led government supported by communist parties would backpedal on economic reforms. SEBI barred UBS Securities Asia from offering new offshore derivative instruments for one year. The order stops UBS and its affiliates from issuing offshore derivative instruments with underlying Indian securities "against the positions held by UBS in Indian securities." The regulator said UBS sold participatory notes, or derivatives, worth $43 million on May 17, 2004, and also sold a large amount of equities for which its affiliate, UBS AG, had issued offshore derivatives backed by Indian shares. The regulator said its investigation had found that the dealings of UBS were done on behalf of hedge fund clients as well as in the proprietary account of UBS and said the company failed to provide the names of its clients. SEBI told UBS to "establish the highest standards of the customer due diligence process."

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