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MUMBAI: The Securities and Exchange Board of India (Sebi) on Thursday slapped a penalty of ₹1.6 crore on senior executives of Kotak Asset Management Company (AMC) including, chief executive Nilesh Shah, for flouting rules pertaining to mutual funds while investing in fixed maturity plans of Essel Group companies.
In a 104-page adjudicating order, the regulator's adjudicating officer found faults in the conduct of the AMC and its officials on two grounds - extending the maturity of papers belonging to Essel group, and lack of due diligence while investing in the Essel group companies.
"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. Consequently, investors of all the six schemes were not paid full amount on maturity based on the Net Asset Value (NAV)," Sebi said in its order.
"No reference was made to the financials and operations of the issuers in the investment plan. Investment decision was only based on analysis of collateral (Zee)," it added.
Sebi had passed its first order in the matter in August last year.
The fund house plans to file an appeal against the roder. "In the same matter, Kotak Mahindra Asset Management Company Limited’s appeal is pending with Securities Appellate Tribunal," said a spokesperson for the AMC.
Others penalised include, Kotak Mahindra Trustee Company, and Kotak AMC's fund managers Lakshmi Iyer, Deepak Agarwal, and Abhishek Bisen besides compliance officers Jolly Bhatt and Gaurang Shah, who were part of the investment committee that approved the investment decisions related to these fixed maturity plans.
According to the regulator, the trustees and AMC should have ensured extreme care, caution, robust due diligence since such debt papers are inherently riskier assets since the secondary markets for these securities are generally illiquid in nature and also since detailed information as well as research reports regarding these entities are not easily available in the market.
