Taurus Asset Management Company has settled with markets regulator Sebi a case of alleged fraudulent trading activities by paying nearly Rs. 1,94,82,201 as settlement charges. Sebi's July 23rd Settlement Order said the amount towards settlement was remitted on June 25.
In February 2017, a small fund house Taurus Mutual Fund took a huge hit on four of their debt schemes when Ballarpur Industries Limited (BILT Paper) defaulted on their debt obligations.
The schemes lost anywhere between 7-11% in a single day.
It is alleged that the applicant was aware of the financial distress in BILT and that the payments made to and received from BILT were synchronized in such a way that the applicant was making the payment for subscribing to Commercial Papers (hereinafter referred to as the “CPs")of BILT just few hours before the maturity of the previous CPs.
It was further alleged that the applicant was aware of the possibility of default by BILT and the Date and Time Stamping Machine (DTSM)was tampered to give benefit to select investors which included one of their own employees and further that despite the downgrade of BILT by the rating agencies, incorrect information was put up by the AMC in its scheme documents as well as on its own website.
The AMC had made a redemption request for their own investment in one of their funds before BILT defaulted on payments, which was cancelled later on by them.
"By cancelling the redemption request, it is alleged that the applicant had given themselves a special treatment which would not have been available to other investors. It is thus alleged that the applicant had resorted to fraudulent and unfair trade practice violating principles of fair valuation and investment valuation norms and thus failed to exercise proper due diligence," said Sebi.
In view of the same,the settlement application was filed.
During the meeting with the Internal Committee of SEBI on March 04, 2020, the authorized representatives of the AMC deliberated upon the settlement terms.
In an e-mail dated March 19, 2020, they proposed the revised settlement terms to settle the proceedings that were initiated for the said defaults.
Taurus AMC also submitted to Sebi that there are no complaints by the unit-holders with regard to the said matter in respect of the various mutual fund schemes of the AMC and that the AMC has already compensated the unit-holders of the affected mutual fund schemes for an amount of Rs.9,63,883.61.
In addition, it was submitted that, the settlement amount of ₹1,95 crore would be paid out of the funds of the applicant and that the liability would not be passed on to the unit holders.
On May 29, Sebi's High Powered Advisory Committee considered the proposed settlement terms and recommended the case for settlement upon payment of the amount, the regulator said in an order dated July 23.