Mumbai: : The Securities Appellate Tribunal (SAT) has set aside an order by market regulator Sebi against global investment firm Goldman Sachs on the issue of disclosures in offshore derivatives instruments (ODI).

In its ruling, SAT not only deprecated the conduct of the adjudicating officer of Sebi but also directed the regulator to pay Rs 1 lakh to the investment banker as cost of litigation.

The case pertains to issuance of ODIs by Mauritius-based affiliate of Goldman Sachs in November 2002 with shares of Himachal Futuristic Communications as the underlying security. The ODIs, after passing through several hands, reached Magnus Capital Corporation Limited, an overseas corporate body (OCB).

Following a circular by Sebi in 2003 revising the format for reporting of investments by Foreign Institutional Investors, Goldman Sachs filed a report with Sebi along with a declaration that was substantially different from one prescribed by the regulator. Taking objection to the report, Sebi imposed the maximum penalty of Rs 1 crore for furnishing false declarations. Goldman Sachs argued that the new format was not prescribed at the time it issued the ODIs.

The SAT order said “this requirement of an undertaking appears to us to be opposed to all norms of reason and is totally devoid of logic.” Responding to the contention of Sebi that Goldman Sachs was penalised for furnishing a false declaration and “not for failure to furnish one”, the SAT order said “this declaration is not incorrect because during this fortnight (the reporting fortnight) the appellant did not issue, renew, cancel or redeem any ODI”.