SEBI’s authority to regulate Global Depository Receipts, traded on overseas exchange: Supreme Court’s analysis in Securities and Exchange Board of India versus Pan Asia Advisors Ltd. and Ors.

The recent verdict of the Supreme Court recognising Securities Exchange Board of India’s (SEBI) jurisdiction to regulate matters pertaining to Global Depository Receipts (GDRs) emanates as a remarkable decision. The judgment although, is reliant on facts of the case, it clarifies the scope of SEBI’s territorial jurisdiction. It enunciates that even though GDRs are issued abroad entirely, they qualify as a form of securities and cannot escape SEBI’s jurisdiction. If a corporation deploys the GDR route to raise its foreign capital and in the process it manipulates the Indian securities market, adversely affecting the interests of investors in India, SEBI possesses the requisite authority to intercede and take coercive actions. With increased cross-border trading in securities, there is a risk of heightened abuse by entities, both Indian and foreign, that can have deleterious effects on the Indian markets. Therefore, this judgement comes as a respite for SEBI which enables it to regulate financial products even if they do not fall exactingly within its regulatory purview, as long as manipulation resulting to adverse impact on securities market is established. This case note thus, appraises this judgment as it appears to have commenced a novel legal doctrine.