FINAL NOTICE

1. ACTION

1.1.
For the reasons given in this Notice, the FSA hereby imposes on Mr Goenka a
financial penalty of USD 6,517,600 (approximately £4.0 million) plus restitution of
USD 3,103,640 (approximately £1.9 million) which will be passed on by the FSA
to the institution which has suffered a loss as a result of Mr Goenka’s actions.

1.2.
The total penalty sum the FSA hereby imposes on Mr Goenka (penalty plus
restitution) is therefore USD 9,621,240 (GBP £ 6,108,707 equivalent).

2. SUMMARY OF REASONS

2.1.
The FSA decided to take this action because Mr Goenka placed orders to trade
which artificially inflated the closing price of Reliance GDRs, an instrument traded
on the International Order Book of the London Stock Exchange, on 18 October
2010. Mr Goenka arranged for a series of substantial and pre-planned trades in

those securities to be executed in the final seconds of the LSE closing auction. The
orders were placed with the intention of increasing the closing price for Reliance
GDRs above a certain level. At the time, Mr Goenka held a structured product on
which the pay-out depended on the closing price of Reliance GDRs that day. By
increasing the closing price, Mr Goenka was able to avoid a loss of USD 3,103,640
under the terms of the structured product.

2.2.
The FSA has concluded that Mr Goenka’s actions amounted to market abuse
(market manipulation) contrary to section 118(5) of the Financial Services and
Markets Act 2000, and decided to impose a financial penalty under section 123(1)
of the Act of USD 6,517,600.

2.3.
Mr Goenka agreed to settle at an early stage of the FSA’s investigation and has
therefore qualified for a 30% (Stage 1) discount under the FSA’s executive
settlement procedures. Were it not for this discount, the FSA would have imposed
a financial penalty of USD 9,310,920.

2.4.
In addition, the FSA hereby requires Mr Goenka to pay restitution of USD
3,103,640 pursuant to section 384(5) of the Act, which will be passed on to the
counterparty to the structured product, who paid Mr Goenka an increased amount
as a direct result of Mr Goenka’s manipulation of the price of Reliance GDRs.

2.5.
The FSA considers that Mr Goenka’s misconduct was serious and has taken
account of:

a) the fact that Mr Goenka had planned to engage in similar behaviour in April
2010 in relation to another structured product that he held;

b) the fact that Mr Goenka’s misconduct involved considerable pre-planning.
The trading concerned necessitated very substantial financial outlay and
involved others; and

c) Mr Goenka’s extensive experience as an investor.

3. DEFINITIONS

3.1.
The following definitions are used in this Notice:

“the Act”
means the Financial Services and Markets Act
2000.

“Closing Auction”
means the closing auction of the LSE. This is a
limited-period auction which takes place at the

close of the main trading session. The results of
the closing auction determine the closing price of
listed securities.

“the FSA”
means the Financial Services Authority.

“GDRs”
means Global Depository Receipts. These are
parcels of shares in a particular company, which
are listed and traded on international exchanges
separately from the company’s shares. One GDR
is equivalent to a multiple of the underlying
security.

“Mr Goenka”
means Mr Rameshkumar Satyanarayan Goenka.

“IOB”
means the International Order Book of the
London Stock Exchange.

“LSE”

means the London Stock Exchange.

“Reliance”

means Reliance Industries Limited.

4. FACTS AND MATTERS

4.1.
Mr Goenka is an Indian businessman who has been living in Dubai for the last 12
years. He is a prominent and sophisticated investor with a substantial portfolio of
investments.

4.2.
Mr Goenka is not a member of the LSE and so can only trade on its markets
through a member firm.

The Structured Products

4.3.
The following two structured products (together “the Structured Products”) were
purchased by Mr Goenka in 2007 and are referred to in this Notice. He purchased
the Structured Products through accounts held with one of his banks:

a) A “3Y USD Phoenix Plus Worst of Gazprom/ Lukoil/ Surgut” issued on 30
April 2007 which had a maturity date of 30 April 2010 (“Structured Product
1”).

b) An “Airbag Leveraged Laggard Note on Indian ADR – Private Placement”
issued on 17 October 2007 which had a maturity date of 18 October 2010
(“Structured Product 2”).

4.4.
The Structured Products each had a cost (face value) of USD 10 million.

4.5.
The Structured Products related to a basket of three GDRs, representing shares in
three different companies, as follows:

a) In relation to Structured Product 1 the three GDRs concerned related to
Russian companies, Gazprom, Lukoil and Surgutneftegaz.

b) In relation to Structured Product 2 the three GDRs concerned related to Indian
securities, Reliance Industries, ICICI Bank and HDFC Bank.

4.6.
For both the Structured Products the final payout to Mr Goenka was dependent on
the closing price of the worst performing or “laggard” of the three different GDRs
on the stated maturity dates. To determine the payout, the closing price of the
laggard GDR would be judged against two figures being (a) the initial price of the
“laggard” and (b) a pre-determined and lower “knock-in price”. Depending on the
closing price of the “laggard” in relation to these two markers Mr Goenka would
achieve one of the following outcomes:

a) If the closing price was higher than its initial price, Mr Goenka would be paid
an uplift (based on a formula) over and above the USD 10 million face value
(a win scenario).

b) If the closing price was above the “knock-in price” but below its initial price
the face value of USD 10m would be repaid (a break-even scenario).

c) If the closing price was below the “knock-in price” Mr Goenka would receive
a pre-determined number of the laggard GDRs, whose value would be
substantially less than the face value he had paid for the structured product (a
loss scenario). The lower the closing price the larger would be the loss realised
by Mr Goenka.

The Closing Auction

4.7.
The closing price for the GDRs on which the Structured Products were based was
determined by the closing auction on the LSE’s IOB. The initial phase of the
closing auction, starting at 15:30 GMT, lasts for ten minutes and is known as the
auction call phase. During this phase, member firms place orders that are recorded
by the exchange but do not immediately result in a trade. Each time an order is
entered, deleted or amended, the theoretical price and theoretical volume that will
result from the closing auction is re-calculated.

4.8.
The theoretical price and volume, known as the Indicative Uncrossing Price (the
“IUP”) and the Indicative Uncrossing Volume (the “IUV”) are visible to the
member firms.

4.9.
Subsequently, in the price determination/uncrossing phase of the auction, the
exchange seeks to match orders for each stock. This occurs at a randomly
determined time, in a thirty second period after the end of call phase, between
15:40:00 and 15:40:30 GMT. At that randomly determined time, the exchange
runs an algorithm that seeks to optimise the volume of securities executed. The
algorithm determines the price for each security at which the greatest volume can
be traded and matches the orders accordingly; this is the closing price. Once the
algorithm has been applied, the exchange disseminates the closing price and
advises member firms, whose orders have been executed, of the trades.

The performance of the structured products

4.10. In the event, the worst performing securities in the baskets of GDRs were as
follows:

a) Gazprom for Structured Product 1.

b) Reliance for Structured Product 2.

4.11. In relation to both Structured Products, as the respective maturity dates
approached, indicative prices were close to the “knock-in price” levels and
therefore there was a degree of uncertainty as to whether Mr Goenka would
recover his outlay under the Structured Products or realise a financial loss.

The plan to manipulate closing prices

a) The Gazprom plan

4.12. Structured Product 1 was due to reach maturity on 30 April 2010. The lower
“knock-in price” for Gazprom was USD 23.91; in the course of the month
Gazprom GDRs were trading between USD 23.10 and USD 25.57.

4.13. In early April 2010 A, a London-based investment adviser to Mr Goenka,
approached B, a London-based broker, on behalf of Mr Goenka, to establish
whether it was possible to increase the closing price of certain GDRs on a given
date by placing large trades in the LSE closing auction.

4.14. On 22 April 2010 A called B to discuss the practicalities of trading in a closing
auction. At that time B asked the names of the two stocks to be traded and was

told “Reliance” and “Gazprom”. A said that A would arrange a conference call to
put B in touch with “this person in Dubai”, that person being Mr Goenka.

4.15. Later that day a conference call took place during which A introduced Mr Goenka
to B. Mr Goenka’s opening comment was “I just want to understand how this
auction works …in terms with IOB”. B then proceeded to explain the closing
auction process in considerable detail. In particular, B explained the likely price
movements that might result from placing orders of various sizes. Mr Goenka
explained that he was looking to trade in Gazprom first and explored with B the
necessary steps for increasing the closing price, the latest time at which an order
could be placed and a number of working examples were discussed. In the course
of the call Mr Goenka asked “Can I ask you now closing at 23.42… if I want to
make it 23.45 how can we do it?”. B replied “you will have to clear out everyone
that was selling at 42 and for safety’s sake go all the way to somebody closing at
46…” The parties arranged for Mr Goenka to set up an online video calling
account in order that Mr Goenka could see B’s screen in real time whilst B was
trading in the auction.

4.16. Mr Goenka stressed to B that there should be a number of practice runs before
actual trading. Mr Goenka said there would be time to observe between 5 and 10
auctions before the actual trading and that they would have “a few trial runs” in
order to “try to minimise the mistakes”.

4.17. On 29 April 2010 a conference call took place between Mr Goenka, B and A. The
three parties discussed arrangements for the following day’s trading. B confirmed
that B had increased B’s firm’s trading limit from £30 million to £50 million in
order to facilitate the Gazprom trading Mr Goenka required. The parties discussed
the course of action to be taken if that limit were to be exceeded and they also
explored the very latest time at which it would be possible to enter orders in the
auction.

4.18. Mr Goenka decided on a two-pronged approach to the manipulation of the GDR
price for Gazprom. Firstly, Mr Goenka would be ready to execute substantive
trades in the market (pre-auction) in order to ensure that the price remained at a
level close to the “knock-in price” going into the closing auction. Secondly, Mr
Goenka would place a series of substantial trades in the final seconds of the closing
auction in order to ensure the closing price was at or above the level he desired.

4.19. In relation to the first stage of the plan, during the day on 30 April 2010 Mr
Goenka purchased three tranches of Gazprom GDRs on the LSE, totalling 225,000
GDRs, at a cost of approximately USD 5,363,759. The three trades concerned
were executed by Mr Goenka in order to ensure that the price of Gazprom going in
to the auction remained at a level that Mr Goenka could then raise to his desired
level by virtue of the orders he intended to execute in the auction.

4.20. At 2.11pm on 30 April 2010 B was provided with a list of the orders Mr Goenka
wished B to place in the closing auction. The orders were all at price levels above
any of the trading in Gazprom GDRs so far that day. The cost of the orders
totalled USD 66 million dollars. B was informed by A that B should enter all of
the orders on to B’s trading system in preparation for the auction and that A would
inform Mr Goenka. B duly confirmed that B had done this. Mr Goenka
subsequently called B and asked that they speak by unrecorded mobile telephone in
relation to the trading. Subsequently, calls were made on both recorded lines and
on mobile telephones.

4.21. The price of Gazprom GDRs prevailing in the market at the time the orders were
sent to B (at 2.11pm) was approximately USD 23.84, USD 0.07 below the knock-
in price. However, shortly before the auction was due to commence President
Putin made a live announcement on Russian television about a proposed merger of
Gazprom and the Ukrainian gas company Naftogaz. The price of Gazprom
securities fell on the news.

4.22. Mr Goenka was informed of the Putin announcement and its impact. As a result of
the Putin announcement Mr Goenka instructed B not to proceed with the planned
auction trading because the Gazprom price had moved too far to be manipulated. B
noted that the plan “will now need much more money and won’t be worth it”. At
3.36pm Mr Goenka called A to inform A that “we’re not doing anything, we’ve
lost the game”. Mr Goenka explained to A that “basically, what happened is the
Putin news came out… the stock went down 2% so we can’t do anything”.

b) The Reliance plan

4.23. As with Structured Product 1, the payout for Structured Product 2 was dependent
on the closing price of the “laggard” (Reliance) in comparison to a “knock-in
price” on the maturity date of 18 October 2010. The “knock-in price” for Reliance
was USD 48.65.

4.24. In early October 2010 Mr Goenka informed A that he wished to buy Reliance
GDRs and participate in the LSE closing auction on 18 October 2010. A put Mr
Goenka in touch with B so that he could “directly transact”.

4.25. On 11 October 2010 Mr Goenka spoke to B directly to discuss trading in Reliance.
Mr Goenka informed B that “there is an enhancement job to do”. Mr Goenka
asked B to “think of a strategy for ourselves, our strike is there” and “we have to
take ourselves up higher”. B said that together they would “think about what to
do”.

4.26. On the morning of 18 October 2010 B spoke with Mr Goenka regarding the trading
plans for that day’s auction. The opening price for Reliance GDRs that morning
was USD 47.20. B assured Mr Goenka he should not worry as “it will happen in
the last ten seconds”. Another call followed between B and Mr Goenka in which
they discussed tactics.

4.27. At 3.19pm, approximately 10 minutes before the auction commenced, Mr Goenka
called B to confirm his orders for the auction trade. At the time Reliance GDRs
were trading at USD 48.28. Mr Goenka provided B with details of the following
orders that he wished to place:

• simultaneous buy and sell orders of 100 GDRs at USD 48.69;

• simultaneous buy and sell orders of 100 GDRs at USD 48.71;

• an order to buy 18,000 GDRs at market. An order at market has no
price limit and is given priority in the uncrossing phase of the auction;

• an order to buy 770,000 GDRs at USD 48.71;

• a further standby order of 351,000 GDRs at USD 48.69 to act as “a
cushion” and only be released on Mr Goenka’s order.

4.28. Taken in their entirety, Mr Goenka’s orders were equivalent to 280% of the
average daily volume of trading in Reliance GDRs at that time. All the orders were
above the knock-in price and the level at which the GDRs were trading at the time.
In total the orders, if filled in their entirety, would have required an expenditure of
approximately USD 55.4 million.

4.29. Mr Goenka informed B that the order to buy 18,000 GDRs at market and the order
to buy 770,000 GDRs at USD 48.71 should be entered at 3:39:54 pm (i.e. six
seconds before the auction close). Mr Goenka said he would instruct B at 3:39:54
pm whether the final “cushion” order of 351,000 was necessary. In a later call
both agreed that six seconds was too little time for B to operate and that B would
therefore place the orders for 18,000 and 770,000 eight seconds before auction
close.

4.30. Mr Goenka was in continuous contact with B during the closing auction. During
that time the first four orders were placed. The order to buy 18,000 at market was
entered at 3:39:50 pm, and the order to buy 770,000 at USD 48.71 was entered at
3:39:52 pm, ten and eight seconds respectively before the start of the
randomisation period. The “cushion” order to buy 351,000 was not entered.

4.31. Prior to entering that final order for 770,000 GDRs the Reliance IUP was USD
47.93, 72 cents below the “knock-in price” of USD 48.65. The impact of Mr
Goenka’s orders was to increase the IUP price to USD 48.71, 6 cents above the
“knock-in price”. This higher indicative IUP was maintained throughout the
remainder of the auction, and became the uncrossing, or closing, price. The
increase from USD 47.93 to USD 48.71 represented a percentage increase of 1.7%.
Mr Goenka’s orders in the closing market were not all filled: the 193,550 GDRs he
did purchase represented 46% of that day’s trading volume and 90% of the trading
in the closing auction. Had the final order entered by Mr Goenka for 770,000
GDRs been filled in its entirety that single order would have cost him USD 37.5
million and would have represented over 200% of the average daily trading volume
for Reliance GDRs at the time.

4.32. At the conclusion of the auction Mr Goenka told B that he really appreciated B’s
efforts and that B was “the world’s number one broker”, and assured B of good
business in the future.

4.33. The price of Reliance GDRs dropped back the next day to close at USD 47.10. Mr
Goenka sold the Reliance GDRs he had acquired. By spreading the sales over
several days (between 21 October 2010 and 29 October 2010) Mr Goenka was able
to avoid a loss on the disposal.

4.34. As a result of the price achieved in the auction by Mr Goenka he was paid USD 10
million by the issuing bank under Structured Product 2. Had the Reliance price
remained at its last indicative auction uncrossing level of USD 47.93, which was
below the “knock-in” price, Mr Goenka would only have received 143,884
Reliance GDRs from the issuing bank, with a value of USD 6,896,360, which
would have equated to a loss on Structured Product 2 of USD 3,103,640.

5. FAILINGS

5.1.
The relevant statutory and regulatory provisions and excerpts from the Code of
Market Conduct, issued by the FSA under section 124 of the Act, are contained in
the Annex.

5.2.
In particular, the FSA notes the following specific example of market abuse (price
manipulation) contained in the Code of Market Conduct at MAR 1.6.15E:

“a trader buys a large volume of commodity futures, which are qualifying
investments, (whose price will be relevant to the calculation of the settlement
value of a derivatives position he holds) just before the close of trading. His
purpose is to position the price of the commodity futures at a false,
misleading, abnormal or artificial level so as to make a profit from his
derivatives position”.

5.3.
The FSA has concluded that, on 18 October 2010, Mr Goenka engaged in market
abuse contrary to section 118(5) of the Act by effecting orders to trade which gave
a false or misleading impression as to the demand for and price of Reliance GDRs.
Further, the trading activity secured the price of those securities at an artificial
level.

Qualifying investments

5.4.
Mr Goenka’s behaviour was in relation to qualifying investments admitted to
trading on a prescribed market within the terms of section 118(1)(a) of the Act.

Legitimate reasons and accepted market practices

5.5.
The orders to trade were not effected for legitimate reasons and in conformity with
accepted market practices:

(1)
The orders to trade were planned and executed to move the price of Reliance
GDRs to close at a level above the “knock-in price” of USD 48.65. Mr
Goenka needed to achieve this price movement in order to avoid a loss (of
approximately USD 3.1million) under Structured Product 2, of which he was
the sole beneficiary. Mr Goenka therefore had an actuating purpose behind
the trading and the trading strategy was carefully pre-planned. In order to
execute the plan Mr Goenka directed considerable resources (in excess of
USD 54 million) to facilitating the price movement.

(2)
In addition Mr Goenka’s trading activity was not in conformity with accepted
market practices; there were no such practices in the relevant market at the
time.

False or misleading impression

5.6.
Mr Goenka’s orders were all at a price above the prevailing market price. The
price of Reliance GDRs closed at USD 48.71 which was USD 0.78 cents higher
than the indicative price of USD 47.93 prior to the entry of Mr Goenka’s orders in
the final seconds of the closing auction. Mr Goenka’s purchase of 193,550
Reliance GDRs in the closing auction was the vast majority of the trading in that
security in the auction, and 46% of the day’s trading in Reliance GDRs. His
purchases were subsequently unwound.

Artificial level

5.7.
In addition, the size, timing and pricing of Mr Goenka’s orders were designed to
secure the closing price above the knock-in price on Structured Product 2 and to
prevent other market participants from having time to react. Mr Goenka’s
instructions to place the orders in the last few seconds of the auction effectively

ensured that there would be little or no time for potential sellers to enter orders in
response to the buy orders entered by B. The trading successfully positioned the
price USD 0.78 higher than the indicative price immediately before the trades were
placed. This was an artificial level, not reflective of the proper interplay of supply
and demand in the market.

5.8.
The FSA considers that Mr Goenka’s sole purpose in trading in Reliance GDRs on
18 October 2010 was to secure their price at an artificial level that was favourable
to him, to avoid losses on Structured Product 2. His behaviour was a deliberate
manipulation of the market.

Conclusion on market abuse

5.9.
In the circumstances described above the FSA finds that Mr Goenka engaged in
market abuse in October 2010 contrary to section 118(5) of the Act. Mr Goenka’s
earlier behaviour in relation to Gazprom in April 2010 is relevant to Mr Goenka’s
trading in Reliance GDRs in October 2010. Mr Goenka’s behaviour in relation to
Gazprom is further evidence that the Reliance market manipulation was deliberate
and carefully planned.

5.10. Pursuant to section 123(1) of the Act the FSA may therefore impose a penalty of
such amount as it considers appropriate on Mr Goenka.

6. SANCTION

6.1.
Under section 123(1) of the Act, the FSA may impose a penalty on any person if it
is satisfied that he has engaged in market abuse. Under section 123(2) of the Act,
the FSA may not impose a penalty if there are reasonable grounds for it to be
satisfied that he believed on reasonable grounds that his behaviour did not amount
to market abuse, or that he took all reasonable precautions and exercised all due
diligence to avoid behaving in a way which amounted to market abuse. The FSA
does not consider that there are reasonable grounds for it to be so satisfied in this
case.

6.2.
The FSA’s policy on imposing a financial penalty is set out in Chapter 6 of DEPP,
relevant excerpts of which are contained in the Annex.

6.3.
The principal purpose of imposing a financial penalty is to promote high standards
of regulatory and market conduct by deterring persons who have committed
breaches from committing further breaches, helping to deter others from
committing breaches and demonstrating generally the benefits of compliant
behaviour (DEPP 6.1.2G).

6.4.
In enforcing the market abuse regime, the FSA's priority is to protect prescribed
markets from any damage to their fairness and efficiency caused by the
manipulation of shares in relation to the market in question. Effective and
appropriate use of the power to impose penalties for market abuse will help to
maintain confidence in the UK financial system by demonstrating that high
standards of market conduct are enforced in all UK regulated markets.

6.5.
In determining whether to take action for a breach and, if so, what action is
appropriate and proportionate, the FSA considers all the relevant circumstances of
the case (DEPP 6.2.1G and DEPP 6.4.1G). For the reasons set out below, the FSA
has decided that it is appropriate to impose a financial penalty on Mr Goenka.

6.6.
As the behaviour in this case occurred after 6 March 2010 the FSA’s new penalty
regime applies. The FSA applies a five-step framework to determine the
appropriate level of financial penalty. DEPP 6.5C sets out the details of the five-
step framework that applies in respect of financial penalties to be imposed on
individuals in market abuse cases.

6.7.
Pursuant to DEPP 6.5C.1G, at Step 1 the FSA seeks to deprive an individual of the
financial benefit derived as a direct result of the market abuse (which may include
the loss avoided) where it is practicable to quantify this.

6.8.
In relation to Structured Product 2, Mr Goenka avoided a loss of USD 3,103,640 as
a result of the market abuse.

6.9.
As set out in paragraph 6.31 below, the FSA requires Mr Goenka to pay restitution
in the full amount of the loss he avoided. As a result there is no further benefit to
him derived from his market abuse, and so the Step 1 figure is nil.

Step 2: The seriousness of the market abuse

6.10. Mr Goenka’s market abuse was not referable to his employment therefore the
appropriate basis for calculation at Step 2 is the loss he avoided as a result of his
market abuse i.e USD 3,103,640.

6.11. Pursuant to DEPP 6.5C.2G, at Step 2 the FSA determines a figure that reflects the
seriousness of the market abuse. That figure is based either on the individual’s
relevant income (where the abuse relates to their employment) or by reference to a
profit multiple which reflects the seriousness of the market abuse.

6.12. The market abuse engaged in by Mr Goenka was not connected to any employment
and therefore, pursuant to DEPP 6.5C.2 G (3), the seriousness is to be reflected in a
multiple of the profit made or loss avoided reflecting the level of seriousness set
out in DEPP 6.5C.2 G (8) as follows:

a) Level 1 – profit multiple of 0;

b) Level 2 – profit multiple of 1;

c) Level 3 – profit multiple of 2;

d) Level 4 – profit multiple of 3; and

e) Level 5 – profit multiple of 4.

6.13. In assessing the seriousness level, the FSA takes into account various factors which
reflect the nature and impact of the market abuse and whether it was committed
deliberately or recklessly.

6.14. DEPP 6.5C.2G(16) lists factors which are likely to be considered factors in favour
of seriousness between levels 1 to 3. A level 1 to 3 status would be appropriate
where little or no profits were made (or losses avoided), where there was no or
limited actual or potential effect on the orderliness of or confidence in markets, and
where the market abuse was committed negligently or inadvertently.

6.15. The FSA does not consider any of these factors to apply to this case. The loss
avoided was substantial. Manipulation of prices for ulterior motives poses a very
real risk to the orderliness of and confidence in the markets. Further, the reasons
discussed for the trading and the very careful planning that took place prior to the
trading exclude any suggestion that the market manipulation was committed
negligently or inadvertently.

6.16. DEPP 6.5C2G(15) lists factors likely to indicate a market abuse of levels 4 or 5.
Of those factors, the FSA considers the following factors to be relevant:

a) The level of benefit (loss avoided) by Mr Goenka of USD 3,103,640 was
significant.

b) On 18 October 2010 Reliance GDRs closed at an inflated price of USD 48.71.
Although the price movement was not, of itself, substantial, it was the result of
abusive trading by an experienced investor whose wealth was sufficient to
bring about such price movements. Abusive trading by such individuals who
are in a position to manipulate the markets in this way has a serious adverse
effect on confidence in the markets generally, in addition to the disorder
created on the IOB that day.

c) Whilst the finding in this Notice relates to Structured Product 2, the evidence
shows that Mr Goenka had intended to engage in market abuse on an earlier
occasion, to avoid losses on Structured Product 1. Although market abuse was
only committed on one occasion, the FSA considers Mr Goenka’s earlier
intentions make his actions that day more serious.

d) Mr Goenka enjoys a prominent position as an investor in the UK and overseas

markets.

e) As set out below, the FSA considers that the market abuse was committed
deliberately.

6.17. DEPP 6.5C2G(13) and (14) set out a number of factors tending to show whether
the market abuse in question was deliberate or reckless. The FSA considers the
following factors (a,b and g) of DEPP 6.5C.2G(13) to be relevant:

a) The market abuse was intentional. Mr Goenka intended or foresaw that the
likely consequences of his actions would result in an increase in the price of
GDRs.

b) Mr Goenka intended to benefit financially from the market abuse directly in
that he intended to avoid a loss of USD 3,103,640 under Structured Product 2.

g) Mr Goenka’s actions were repeated. But for the unexpected announcement by
President Putin on 30 April 2010 which caused the price of Gazprom to fall,
Mr Goenka would have engaged in the same form of abusive behaviour on an
earlier occasion in relation to Structured Product 1.

6.18. Taking into account the factors above, the FSA considers that that the behaviour of
Mr Goenka is at level 4 of seriousness. The multiple to be applied at Step 2 is
therefore 3.

6.19. Accordingly, the Step 2 figure is USD 9,310,920.

Step 3: Mitigating and aggravating factors

6.20. Pursuant to DEPP 6.5C.3G, at Step 3 the FSA may increase or decrease the amount
of the financial penalty arrived at after Step 2, but not including any amount to be
disgorged as set out in Step 1, to take into account factors which aggravate or
mitigate the market abuse. Any such adjustment will be made by way of a
percentage adjustment to the figure determined at Step 2.

6.21. The FSA has borne in mind that Mr Goenka acted in concert with two FSA
approved persons who, Mr Goenka asserts, raised no concerns with him as to his
behaviour. The FSA has also borne in mind that Mr Goenka has not been the
subject of any prior disciplinary action by the FSA.

6.22. The FSA does not consider that any of the aggravating or mitigating factors set out
at DEPP 6.5C.3G(2) affect to a significant extent the penalty appropriate to Mr
Goenka’s actions.

6.23. Having regard to the above matters, the FSA does not consider it necessary to
make any adjustment for Step 3. At Step 3 the penalty is therefore USD 9,310,920.

Step 4: adjustment for deterrence

6.24. Pursuant to DEPP 6.5C.4G, if the FSA considers that the figure arrived at after
Step 3 is insufficient to deter the individual who engaged in market abuse, or
others, from committing further or similar breaches, then the FSA may increase the
penalty.

6.25. The FSA does not consider it necessary to increase the Step 3 figure in this case.

Step 5: Settlement discount

6.26. Pursuant to DEPP 6.5D.4G, if the FSA and an individual on whom a penalty is to
be imposed agree the amount of the financial penalty and other terms, DEPP 6.7
provides that the amount of the financial penalty which might otherwise have been
payable will be reduced to reflect the stage at which the FSA and the individual
reached agreement. The settlement discount does not apply to the disgorgement of
the benefit calculated at Step 1.

6.27. The FSA and Mr Goenka reached agreement at Stage 1 and so a 30% discount
applies to the Step 4 figure.

6.28. The penalty after Step 5 is therefore USD 6,517,644.

6.29. The FSA therefore imposes a total financial penalty of USD 6,517,644 on Mr
Goenka for market abuse.

6.30. It is the FSA’s policy to round down the final penalty figure to the nearest £100.
As these calculations are in USD and the payment will be made in USD, the FSA
has rounded down the final penalty figure to the nearest USD 100. The final
penalty is therefore USD 6,517,600 (approximately £4.0 million).

Restitution

6.31. Under section 384 of the Act the FSA has the power, if it is satisfied that a person
has engaged in market abuse and that one or more persons have suffered loss as a
result of the market abuse, to require restitution to be paid to the appropriate person
of such amount as appears just to the FSA, in accordance with such arrangements
as the Authority considers appropriate. The FSA has published guidance on the
exercise of its power under section 384 of the Act in Chapter 11 of its Enforcement
Guide.

6.32. In this case the market abuse carried on by Mr Goenka caused the counterparty to
Structured Product 2 to pay him USD 10 million rather than the Reliance GDRs
with a market value of USD 6,896,360 which it would otherwise be required to pay
him under the terms of Structured Product 2. The FSA considers it just that Mr
Goenka pay the full amount of the difference, USD 3,103,640, in restitution. The

FSA therefore requires Mr Goenka to pay USD 3,103,640 to it in restitution, which
will be passed on by it to the counterparty.

7. PROCEDURAL MATTERS

Decision Makers

7.1.
The decision which gave rise to the obligation to give this Notice was made by the
Settlement Decision Makers.

7.2.
This Final Notice is given to you in accordance with section 390 of the Act.

Manner of and time for Payment

7.3.
The financial penalty and restitution sum must be paid in full by Mr Goenka, either
by the FSA drawing down the full amount from a Letter of Credit provided by Mr
Goenka or by Mr Goenka directly, by no later than 7 November 2011, 21 days
from the date of this Final Notice.

If the financial penalty is not paid

7.4.
If any or all of the financial penalty or the restitution sum is outstanding on 8
November 2011, the FSA may recover the outstanding amount as a debt owed by
Mr Goenka and due to the FSA.

7.5.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of
information about the matter to which this Notice relates. Under those provisions,
the FSA must publish such information about the matter to which this notice
relates as the FSA considers appropriate. The information may be published in
such manner as the FSA considers appropriate. However, the FSA may not
publish information if such publication would, in the opinion of the FSA, be unfair
to you or prejudicial to the interests of consumers.

7.6.
The FSA intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.

FSA contacts

7.7.
For more information concerning this matter generally, you should contact Kevin
Thorpe of the Enforcement and Financial Crime Division of the FSA (direct line:

020 7066 4450).

FSA Enforcement and Financial Crime Division

ANNEX: Relevant Statutory and Regulatory Provisions

1.1. The FSA has the power, pursuant to section 123(1) of the Act, to impose a financial
penalty where it is satisfied that a person (“A”) has engaged in market abuse or by
taking or refraining from taking any action has required or encouraged another
person or persons to engage in behaviour which, if engaged in by A, would amount
to market abuse.

1.2. Section 123(2) of the Act states that the Authority may not impose a penalty for
market abuse in certain circumstances:

But the Authority may not impose a penalty on a person if … there are
reasonable grounds for it to be satisfied that –

(a) he believed, on reasonable grounds, that his behaviour did not fall within
paragraph (a) or (b) of subsection (1), or

(b) he took all reasonable precautions and exercised all due diligence to avoid
behaving in a way which fell within paragraph (a) or (b) of that subsection.

1.3. Under section 118(1) of the Act market abuse is behaviour which occurs in relation
to qualifying investments admitted to trading on a prescribed market, and which falls
within any one or more of the types of behaviour set out in subsections (2) to (8).

1.4. By virtue of the Financial Services and Markets Act 2000 (Prescribed Markets and
Qualifying Investments) Order 2001 (SI 2001/996) (as amended) the IOB of the LSE
is a prescribed market.

1.5. By virtue of EC Directive 93/22/EC and Article 1(3) of the Insider Dealing/Market
Abuse Directive (2003/6/EC) Reliance GDRs and Gazprom GDRs are qualifying
investments for the purposes of the Act.

1.6. Section 118(5) of the Act describes a form of behaviour amounting to market abuse
where an individual engages in behaviour (in relation qualifying investments on a
prescribed market) otherwise than for legitimate reasons and in conformity with
accepted market practices which:

a) Gives or is likely to give a false or misleading impression as to the supply
of, or demand for, or as to the price of, one or more qualifying investments, or

b) Secures the price of one or more such investments at an abnormal or
artificial level.

1.7. The FSA has the power, pursuant to section 384 of the Act, if it is satisfied that a

person has engaged in market abuse and either that profits have accrued to the person
concerned as a result of the market abuse or that one or more persons have suffered
loss or been otherwise affected as a result of the market abuse, to require the person
concerned to pay, in accordance with such arrangements as the FSA considers
appropriate, to the appropriate person such amount as appears to the FSA to be just,
having regards to the profits accrued or the extent of the loss or other adverse effect.

The Code of Market Conduct

1.8. The Code of Market Conduct (“MAR”) issued by the FSA pursuant to section 119 of
the Act provides assistance in relation to section 118(5) of the Act when determining
whether or not behaviour amounts to market abuse. In deciding to take the action
proposed, the FSA has had regard to MAR and other guidance published in the FSA
Handbook.

1.9. MAR 1.2.3 G states that section 118(1)(a) of the Act does not require the person
engaging in the behaviour in question to have intended to commit market abuse.

1.10. MAR 1.6.5E gives guidance on “legitimate reasons” and lists a number of factors to
be taken into account including whether there was an actuating purpose or
illegitimate reason behind the trading and whether the trading was executed in a
particular way with the purpose of creating a false or misleading impression.

1.11. MAR 1.6.9E gives guidance on “false or misleading impression” and lists a number
of factors to be taken into account including the extent to which the trading
represents a significant volume of trading in the qualifying investment and the extent
to which orders to trade were undertaken at or around a specific time “when
reference prices, settlement prices and valuations are calculated and lead to price
changes which have an effect on such prices and valuations”.

1.12. MAR 1.6.10E gives guidance on whether behaviour amounts to “securing an
abnormal or artificial price level” and lists a number of factors to be taken into
account including the extent to which the individual had a direct interest in the price
of the qualifying investment, the extent to which the volatility movements are
outside their usual daily, weekly or monthly range and whether the individual has
successively or consistently increased their bid or offer price.

1.13. MAR 1.6.15E gives two examples of market abuse (manipulating prices): under
118(5) of the Act which are relevant to this matter. Those examples are where:

1) “a trader simultaneously buys and sells the same qualifying investment (that
is, trades with himself) to give the appearance of a legitimate transfer of title
or risk (or both) at a price outside the normal trading range for the qualifying
investment. The price of the qualifying investment is relevant to the
calculation of the settlement value of an option. He does this while holding a

position in the option. His purpose is to position the price of the qualifying
investment at a false, misleading, abnormal or artificial level, making him a
profit or avoiding a loss from the option”

2) “a trader buys a large volume of commodity futures, which are qualifying
investments, (whose price will be relevant to the calculation of the settlement
value of a derivatives position he holds) just before the close of trading. His
purpose is to position the price of the commodity futures at a false,
misleading, abnormal or artificial level so as to make a profit from his
derivatives position”.

Relevant Guidance – Decision Procedures and Penalties Manual (DEPP)

1.14. Section 123(1) of the Act authorises the FSA to impose financial penalties in cases
of market abuse. Section 124 of the Act requires the FSA to issue a statement of its
policy with respect to the imposition of penalties for market abuse and the amount of
such penalties. The FSA’s policy in this regard is contained in Chapter 6 of the
Decision Procedure and Penalties Manual (DEPP) as applicable from 28 August
2007. In deciding whether to exercise its power under section 123 of the Act, the
FSA must have regard to this statement.

1.15. DEPP 6.2 sets out a number of factors to be taken into account when the FSA
decides to take action for a financial penalty. They are not exhaustive, but include
the nature and seriousness of the suspected behaviour, and the conduct of the person
concerned after the behaviour was identified.

1.16. In deciding whether to exercise its power under section 123 in the case of any
particular behaviour, the FSA must have regard to this statement of policy.
Therefore, in determining the penalty to be imposed on Mr Goenka, the FSA has had
regard to DEPP 6 as it applied in October 2010. With regard to the application of
section 123(2) of the Act, DEPP 6.3.2 G sets out factors that the FSA may take into
account in determining whether the conditions of 123(2) are met. Factors relevant to
this notice include:

(1)
whether, and if so to what extent, the behaviour in question was or was
not analogous to behaviour described in the Code of Market Conduct
(see MAR 1) as amounting or not amounting to market abuse or
requiring or encouraging;

(2)
whether the FSA has published any guidance or other materials on the
behaviour in question and if so, the extent to which the person sought to
follow that guidance or take account of those materials (see the Reader's
Guide to the Handbook regarding the status of guidance.) The FSA will
consider the nature and accessibility of any guidance or other published
materials when deciding whether it is relevant in this context and, if so,

what weight it should be given; and

(3)
whether, and if so to what extent, the behaviour complied with the rules
of any relevant prescribed market or any other relevant market or other
regulatory requirements (including the Takeover Code) or any relevant
codes of conduct or best practice.

(4)
the level of knowledge, skill and experience to be expected of the person
concerned

1.17. The five steps for penalties imposed on individuals in market abuse cases

Step 1 – disgorgement

DEPP 6.5C.1G
The FSA will seek to deprive an individual of the financial benefit
derived as a direct result of the market abuse (which may include
the profit made or loss avoided) where it is practicable to quantify
this. The FSA will ordinarily also charge interest on the benefit.

Step 2 – the seriousness of the market abuse

DEPP 6.5C.2G
(1)
The FSA will determine a figure dependent on the

seriousness of the market abuse and whether or not it was
referable to the individual's employment. This reflects the FSA's
view that where an individual has been put into a position where
he can commit market abuse because of his employment the fine
imposed should reflect this by reference to the gross amount of
all benefits derived from that employment.

(2)
In cases where the market abuse was referable to the

individual's employment, the figure for the purpose of Step 2
will be the greater of:

(a)
a figure based on a percentage of the individual's

“relevant income”. The percentage of relevant income
which will apply is explained in paragraphs (6) and (8) to
(16) below;

(b)
a multiple of the profit made or loss avoided by the

individual for his own benefit, or for the benefit of other
individuals where the individual has been instrumental in
achieving that benefit, as a direct result of the market abuse
(the “profit multiple”). The profit multiple which will
apply is explained in paragraphs (6) and (8) to (16) below;
and

(c)
for market abuse cases which the FSA assesses to be

seriousness level 4 or 5, £100,000. How the FSA will
assess the seriousness level of the market abuse is
explained in paragraphs (9) to (16) below. The FSA
usually expects to assess market abuse committed
deliberately as seriousness level 4 or 5.

(3)
In cases where the market abuse was not referable to the

individual's employment, the figure for the purpose of Step 2
will be the greater of:

(a)
a multiple of the profit made or loss avoided by the

individual for his own benefit, or for the benefit of other
individuals where the individual has been instrumental in
achieving that benefit, as a direct result of the market abuse
(the “profit multiple”). The profit multiple which will
apply is explained in paragraphs (7) to (16) below; and

(b)
for market abuse cases which the FSA assesses to be

seriousness level 4 or 5, £100,000. How the FSA will
assess the seriousness level of the market abuse is
explained in paragraphs (9) to (16) below. The FSA
usually expects to assess market abuse committed
deliberately as seriousness level 4 or 5.

(4)
An individual's “relevant income” will be the gross amount

of all benefits received by the individual from the employment in
connection with which the market abuse occurred (the “relevant
employment”) for the period of the market abuse. In determining
an individual's relevant income, “benefits” includes, but is not
limited to, salary, bonus, pension contributions, share options
and share schemes; and “employment” includes, but is not
limited to, employment as an adviser, director, partner or
contractor.

(5)
Where the market abuse lasted less than 12 months, or was

a one-off event, the relevant income will be that earned by the
individual in the 12 months preceding the final market abuse.
Where the individual was in the relevant employment for less
than 12 months, his relevant income will be calculated on a pro
rata basis to the equivalent of 12 months' relevant income.

(6)
In cases where the market abuse was referable to the

individual's employment:

(a)
the FSA will determine the percentage of relevant

income which will apply by considering the seriousness of
the market abuse and choosing a percentage between 0%

and 40%; and

(b)
the FSA will determine the profit multiple which will

apply by considering the seriousness of the market abuse
and choosing a multiple between 0 and 4.

(7)
In cases where the market abuse was not referable to the

individual's employment the FSA will determine the profit
multiple which will apply by considering the seriousness of the
market abuse and choosing a multiple between 0 and 4.

(8)
The percentage range (where the market abuse was

referable to the individual's employment) and profit multiple
range (in all cases) are divided into five fixed levels which
reflect, on a sliding scale, the seriousness of the market abuse.
The more serious the market abuse, the higher the level. For
penalties imposed on individuals for market abuse there are the
following five levels (the percentage figures only apply where
the market abuse was referable to the individual's employment):

(a)
level 1 - 0%, profit multiple of 0;

(b)
level 2 - 10%, profit multiple of 1;

(c)
level 3 - 20%, profit multiple of 2;

(d)
level 4 - 30%, profit multiple of 3; and

(e)
level 5 - 40%, profit multiple of 4.

(9)
The FSA will assess the seriousness of the market abuse to

determine which level is most appropriate to the case.

(10) In deciding which level is most appropriate to a market
abuse case, the FSA will take into account various factors which
will usually fall into the following four categories:

(a)
factors relating to the impact of the market abuse;

(b)
factors relating to the nature of the market abuse;

(c)
factors tending to show whether the market abuse

was deliberate; and

(d)
factors tending to show whether the market abuse

was reckless.

(11) Factors relating to the impact of the market abuse include:

(a)
the level of benefit gained or loss avoided, or

intended to be gained or avoided, by the individual from
the market abuse, either directly or indirectly;

(b)
whether the market abuse had an adverse effect on

markets and, if so, how serious that effect was. This may
include having regard to whether the orderliness of, or
confidence in, the markets in question has been damaged
or put at risk; and

(c)
whether the market abuse had a significant impact on

the price of shares or other investments.

(12) Factors relating to the nature of the market abuse include:

(a)
the frequency of the market abuse;

(b)
whether the individual abused a position of trust;

(c)
whether the individual caused or encouraged other

individuals to commit market abuse;

(d)
whether the individual has a prominent position in

the market;

(e)
whether the individual is an experienced industry

professional;

(f)
whether the individual held a senior position with the

firm; and

(g)
whether the individual acted under duress.

(13) Factors tending to show the market abuse was deliberate
include:

(a)
the market abuse was intentional, in that the
individual intended or foresaw that the likely or
actual consequences of his actions would result in
market abuse;

(b)
the individual intended to benefit financially from the
market abuse, either directly or indirectly;

(c)
the individual knew that his actions were not in
accordance with exchange rules, share dealing rules

and/or the firm's internal procedures;

(d)
the individual sought to conceal his misconduct;

(e)
the individual committed the market abuse in such a
way as to avoid or reduce the risk that the market
abuse would be discovered;

(f)
the individual was influenced to commit the market
abuse by the belief that it would be difficult to detect;

(g)
the individual's actions were repeated;

(14) Factors tending to show the market abuse was reckless
include:

(a)
the individual appreciated there was a risk that his

actions could result in market abuse and failed adequately
to mitigate that risk; and

(b)
the individual was aware there was a risk that his

actions could result in market abuse but failed to check if
he was acting in accordance with internal procedures.

(15) In following this approach factors which are likely to be
considered 'level 4 factors' or 'level 5 factors' include:

(a)
the level of benefit gained or loss avoided, or

intended to be gained or avoided, directly by the individual
from the market abuse was significant;

(b)
the market abuse had a serious adverse effect on the

orderliness of, or confidence in, markets;

(c)
the market abuse was committed on multiple

occasions;

(d)
the individual breached a position of trust;

(e)
the individual has a prominent position in the market;

and

(f)
the market abuse was committed deliberately or

recklessly.

(16) In following this approach factors which are likely to be

considered 'level 1 factors', 'level 2 factors' or 'level 3 factors'
include:

(a)
little, or no, profits were made or losses avoided as a

result of the market abuse, either directly or indirectly;

(b)
there was no, or limited, actual or potential effect on

the orderliness of, or confidence in, markets as a result of
the market abuse; and

(c)
the market abuse was committed negligently or

inadvertently.

Step 3 - mitigating and aggravating factors

DEPP 6.5C.3G
(1)
The FSA may increase or decrease the amount of the

financial penalty arrived at after Step 2, but not including any
amount to be disgorged as set out in Step 1, to take into account
factors which aggravate or mitigate the market abuse. Any such
adjustments will be made by way of a percentage adjustment to
the figure determined at Step 2.

(2)
The following list of factors may have the effect of

aggravating or mitigating the market abuse:

(a)
the conduct of the individual in bringing (or failing to

bring) quickly, effectively and completely the market
abuse to the FSA's attention (or the attention of other
regulatory authorities, where relevant);

(b)
the degree of cooperation the individual showed

during the investigation of the market abuse by the FSA, or
any other regulatory authority allowed to share information
with the FSA;

(c)
whether the individual assists the FSA in action taken

against other individuals for market abuse and/or in
criminal proceedings;

(d)
whether the individual has arranged his resources in

such a way as to allow or avoid disgorgement and/or
payment of a financial penalty;

(e)
whether the individual had previously been told about

the FSA's concerns in relation to the issue, either by means
of a private warning or in supervisory correspondence;

(f)
the
previous
disciplinary
record
and
general

compliance history of the individual;

(g)
action taken against the individual by other domestic

or international regulatory authorities that is relevant to the
market abuse in question;

(h)
whether FSA guidance or other published materials

had already raised relevant concerns, and the nature and
accessibility of such materials; and

(i)
whether the individual agreed to undertake training

subsequent to the market abuse.

Step 4 - adjustment for deterrence

DEPP 6.5C.4G
(1)
If the FSA considers the figure arrived at after Step 3 is

insufficient to deter the individual who committed the market
abuse, or others, from committing further or similar abuse then
the FSA may increase the penalty. Circumstances where the FSA
may do this include:

(a)
where the FSA considers the absolute value of the

penalty too small in relation to the market abuse to meet its
objective of credible deterrence;

(b)
where previous FSA action in respect of similar

market abuse has failed to improve industry standards; and

(c)
where the penalty may not act as a deterrent in light

of the size of the individual's income or net assets.

Step 5- settlement discount

DEPP 6.5C.5G
The FSA and the individual on whom a penalty is to be imposed
may seek to agree the amount of any financial penalty and other
terms. In recognition of the benefits of such agreements, DEPP 6.7
provides that the amount of the financial penalty which might
otherwise have been payable will be reduced to reflect the stage at
which the FSA and the individual concerned reached an agreement.
The settlement discount does not apply to the disgorgement of any
benefit calculated at Step 1.

1.18. DEPP 6.3 sets out an inexhaustive list of factors which the FSA may take into
account when deciding whether either of the two conditions in section 123(2) of the

Act is met. These include:

(1)
whether the behaviour was analogous to behaviour described MAR;

(2)
whether the FSA has published any guidance on the behaviour;

(3)
the level of knowledge, skill and experience to be expected of the
person concerned;

(3)
whether, and if so to what extent, the person can demonstrate that the
behaviour was engaged in for a legitimate purpose and in a proper way;

(4)
whether, and if so to what extent, the person followed internal
procedures in relation to the behaviour (for example, did the person
discuss the behaviour with internal line management and/or internal
legal or compliance departments), and

(5)
whether the person sought any appropriate advice and followed that
advice.

1.19. DEPP 6.4 and 6.5 state that the FSA will consider all the relevant circumstances of a
case when deciding whether to impose a penalty or issue a public censure and when
it determines the level of a financial penalty that is appropriate.