Sebi Imposes Penalty of Rs 1.6 Crore on Kotak AMC Managing Director Nilesh Shah, 5 Others

Capital markets regulator Securities and Exchange Board of India or SEBI, has imposed a effective of Rs 1.6 crore on seven entities and senior executives of Kotak Mahindra Trustee Company and Managing Director of Kotak AMC Nilesh Shah for flouting guidelines that had been related to mutual funds whereas investing in Essel Group corporations. It has additionally penalised different executives together with Kotak AMC’s fund managers — Lakshmi Iyer, Deepak Agarwal, Abhishek Bisen — Compliance Officer Jolly Bhatt and Gaurang Shah, who was one of many members of the funding committee that accepted the funding choices associated to sure Fixed Maturity Plan (FMP) schemes, Sebi mentioned in an order.

In the over-100 web page adjuncting order dated June 30, the markets regulator mentioned that its adjuncting officer discovered that there have been faults within the conduct of the officers on two grounds. These embody faults within the extending the maturity of papers belonging to Essel group, and an absence of due diligence throughout funding within the Essel group corporations.

“It is observed that Kotak AMC entered into an agreement with promoters and other promoter entities of Essel Group to extend the maturity of securities of various Essel Group entities to September 30, 2019. As a result, investors of all the six schemes were not paid full amount on maturity based on the Net Asset Value (NAV),” mentioned Sebi in its order.

“No reference was made to the financials and operations of the issuers within the funding plan. Investment resolution was solely primarily based on evaluation of collateral (Zee),” Sebi added.

They have been directed to pay the penalties inside 45 days. The case pertains to 6 FMP schemes that matured in April and May 2019, which held investments in debt securities issued by Edisons Utility Works Pvt Ltd and Konti Infrapower & Multiventures Pvt Ltd, belonging to the Essel Group. The debt securities had been secured by pledge of fairness shares of Zee Entertainment Enterprises Ltd by its promoter Cyquator Media Services.

Kotak Mahindra Asset Management Company (AMC) entered into an settlement with promoters and different promoter entities of Essel Group to increase the maturity of securities of varied Essel Group entities to September 30, 2019. As a end result, traders of all of the six schemes weren’t paid full quantity on maturity primarily based on the Net Asset Value of the schemes. Sebi discovered that Kotak Mahindra Trustee Company, being a trustee of Kotak AMC, didn’t disclose scheme associated info, notably relating to the adversarial state of affairs associated to Essel Group corporations, to its unitholders precisely and in a well timed method, regardless of being conscious of the identical since January 2019.

According to Sebi, info of Essel promoters not offering further cowl when the margin name triggered and the choice of AMC and trustees to increase the maturity of the securities, all being info having adversarial bearing on the investments of traders weren’t communicated to the traders when the occasions came about.

“Lapses and violations have been observed on the part of the noticees (seven entities) with regard to lack of due diligence and consequently negligent while investing in Essel Group companies as well as with regard to maturity date of the security exceeding the maturity date schemes, the six FMP schemes… and not being wound up at the end of their maturities and being partially redeemed at the end of their maturity dates,” it mentioned.

Accordingly, Sebi imposed a effective of Rs 40 lakh on Kotak Mahindra Trustee Company, Nilesh Shah (Rs 30 lakh), Iyer (Rs 25 lakh), Agarwal (Rs 20 lakh), Bhatt (Rs 10 lakh), Bisen (Rs 15 lakh) ) and Gaurang Shah (Rs 20 lakh). The order got here after Sebi seen that the traders of sure FMPs launched by the Kotak Mahindra Mutual Fund weren’t paid their full proceeds primarily based on the declared NAV of the mentioned schemes as on their respective maturity dates.

(With PTI inputs)

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