Mumbai. National Securities Depository Ltd has frozen the accounts of three foreign funds Albula Investment Fund, Cresta Fund and APMS Investment Fund. This news is weighing heavily for the Adani Group, led by Gautam Adani, the second largest rich in India and Asia.
These foreign funds have shares worth more than Rs 43,500 crore in 4 companies of the Adani Group. According to the NSDL website, these accounts were frozen on or before May 31.
After this news, there is a huge decline in the companies of Adani Group in the Indian stock market. After this news, 5 out of 6 companies of Adani started lower circuit.
All three have 6.82 percent stake in Adani Enterprises, 8.03 percent in Adani Transmission, 5.92 percent in Adani Total Gas and 3.58 percent in Adani Green.Also read- LIC IPO: Government plans to raise Rs 25,000 crore from anchor investors
According to law firms handling custodian banks and foreign investors, these foreign funds may not have complete information about beneficial ownership. Because of this their accounts have been frozen. Under the Prevention of Money Laundering Act, it is necessary to give complete information about Beneficial Ownership.
What does account freeze mean?
An official said that usually custodians warn their clients about such action, but if the fund does not respond to this or does not follow it, then the accounts can be frozen. Freezing the account means that the fund cannot sell any existing securities or buy new ones.
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Emails sent to NSDL, SEBI and Adani Group in this regard did not elicit any response. Albula Investment Fund, Cresta Fund and APMS Investment Fund could not be contacted. These three funds are registered with SEBI as Foreign Portfolio Investors and operate out of Mauritius. All three are registered in Port Louis at the same address and do not have any website.
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In 2019, the capital markets regulator made the KYC documentation for FPIs as per the PMLA. The funds were given time to comply with the new rules till 2020. SEBI said that the accounts of funds that do not comply with the new rules will be frozen. According to the new rules, FPIs had to provide some additional information. These included disclosure of common ownership and personal details of key employees such as fund managers.