Discussions began last April, when the Deputy Prime Minister and Minister of Finance of Mauritius, on a visit to India, suggested the signing of an MoU, and in June the Mauritian Financial Services Development Act was amended to give wider powers to the FSC for investigation and exchange of information with other regulators.

The MOU provides for the two signatory Authorities to assist each other in the detection of fraudulent market practices, including insider dealing and market manipulation in the areas of securities transactions and derivative dealings. Its principal objective is to support the sound development of the securities markets in both countries by encouraging legitimate best practices. Structures have been established for effective implementation of exchange of information, both on request and on a voluntary basis, about suspicious securities dealings between the two countries. The intention behind the MOU is to track down transactions tainted by fraud and financial crime, not to target bona fide legitimate transactions.

It is expected that the MOU will go a long way towards dispelling doubts about the unwillingness of the two Authorities to engage in the effective exchange of information in accord with standing international best practices. The MOU paves the way for a fruitful cooperation between SEBI and FSC in a bid to preserve the credibility and soundness of the markets falling under their respective purviews.

Indian Government officials said the agreement would deter traders from routing money with doubtful origins through Mauritius: “Earlier, Mauritius was considered a ‘safe-haven’ for these activities since the Mauritius law prevented sharing of information with foreign regulators,” a government official said.

SEBI chairman G. N. Bajpai told a news conference: 'The MoU …will establish a framework for mutual assistance — in discovery of taking action against market manipulation and other fraudulent practices in securities dealings; enforcement of laws relating to these areas; supervising and monitoring securities and futures market and clearing and settlement activities and their compliance with the relevant laws and regulations, takeovers and mergers.”

“Under this protocol, we can ask FSC to furnish us with specific details on illegal market practices and take appropriate measures...this will assist us to investigate live cases of securities scam of 2000-01.”

The Indian government had recently introduced the SEBI Act 2002 to give the market regulator greater powers to deal with market abuse. The agreement with Mauritius is one of a series that SEBI is signing with major trading partners.