Indian regulator cancels Sahara's portfolio management license

By Himank Sharma

MUMBAI (Reuters) - India's markets regulator has canceled the portfolio management license held by Sahara's asset management division in yet another setback for the group that is trying to raise $1.6 billion to free its jailed boss.

Sahara Chairman Subrata Roy has been held in a New Delhi jail since last March after he failed to comply with a court order to repay investors in a bond program that was ruled illegal.

The Securities and Exchange Board of India (SEBI) said on Friday that Sahara Asset Management Company Private Ltd did not meet its "fit and proper" norms, due to the legal proceedings against some Sahara firms and officials, including founder Roy.

SEBI member S. Raman wrote in his order cancelling the license that allowing Sahara to run its portfolio management business could "cause prejudice to the interests of investors and the safety and integrity of the securities market".

Sahara has been locked in a lengthy legal battle with SEBI over the bond program and the regulator is seeking redress for millions of investors.

SEBI also said on Friday it had launched adjudication proceedings against Roy, two of his companies and some of their executives.

A SEBI official, who declined to be named due to the sensitivity of the matter, said the proceedings, which could lead to fines, were being launched because investors in the illegal bond program had still not been refunded by Sahara.

Sahara did not immediately respond to a request for comment on the license cancellation or the adjudication proceedings.

SEBI said Sahara's asset management company has 30 days to transfer its portfolio management business to another company registered with the regulator, or must allow investors to redeem assets.

(Writing by Sumeet Chatterjee; editing by David Clarke)