L&T Mutual Fund and ex-officials settle inter-scheme transfer case with Sebi

L&T MF had been issued a show cause notice after a Sebi probe in the inter-scheme transfers found some violations between 1 April 2017 and 30 June 2018

Livemint
First Published17 Feb 2023
Sebi’s investigation observed that the fund house failed to ensure that transfer of securities from one scheme to another be only allowed if such transfers are done at prevailing market price. (Ashesh Shah)
Sebi’s investigation observed that the fund house failed to ensure that transfer of securities from one scheme to another be only allowed if such transfers are done at prevailing market price. (Ashesh Shah)

Adjudication proceedings against L&T Mutual Fund and its former officials have been disposed of after the fund house applied for settlement with the Securities and Exchange Board of India (Sebi) which had conducted an investigation in the inter-scheme transfers at L&T MF between 1 April 2017 and 30 June 2018

L&T MF had been issued a show cause notice after a Sebi probe in the inter-scheme transfers found some violations. Following the investigation, a show-cause notice was issued to L&T MF, Kailash Kulkarni (former chief executive officer), Shriram Ramanathan (former head of fixed income), Vikas Garg (former portfolio manager-fixed income) and Jalpan Shah (former portfolio manager – fixed income), as to why an inquiry should not be held against them for alleged violations.Sebi’s investigation observed that the fund house failed to ensure that transfer of securities from one scheme to another be only allowed if such transfers are done at prevailing market price. And that “the securities so transferred are in conformity with the investment objective of the scheme”.

Further, the investigation observed that the fund house failed to ensure that the “valuation of investments should be based on the principles of fair valuation i.e. valuation should be reflective of the realizable value of the securities/assets; the valuation should be done in good faith and in true and fair manner through appropriate valuation policies and procedures; the valuation policies and procedures approved by the Board of asset management company should seek to address conflict of interest; and there should be policies and procedures to detect and prevent incorrect valuation”.

However, the inquiry has now been disposed of after the fund house and the former officials applied for settling the case with Sebi. The officials each paid 14.6 lakh and the fund house paid 57 lakh as part of the settlement proceedings. A total of 1.15 crore was paid as settlement.

“Pending the adjudication proceedings, the applicants proposed to settle the instant proceedings initiated against them, without admitting or denying the findings of fact and conclusions of law, and filed settlement applications with Sebi,” Sebi’s order said.

L&T MF has now been acquired by HSBC MF, with Kailash Kulkarni acting as co-CEO of HSBC MF. Ramanathan is also now part of HSBC MF as chief investment officer of fixed income, while Shah is a fixed income fund manager at HSBC MF. Garg is now head of fixed income at Invesco MF.

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