SEBI imposes penalty of ₹2 crore on former MD of Yes Bank Rana Kapoor
SEBI imposes penalty of ₹2 crore on former MD of Yes Bank Rana Kapoor
The former Managing Director and Chief Executive Officer of Yes Bank Ltd, Rana Kapoor has been penalized with a fine of ₹2 crore by the Securities and Exchange Board of India (SEBI). This fine is in pursuant to a case of mis-selling of additional tier-1 (AT1) bonds investors.
SEBI received multiple complaints from investors of Basel III compliant AT1 bonds that were issued by Yes Bank. The complaints were about AT1 bonds being palmed off to senior citizens under the guise of super fixed deposits
AT1 bonds worth ₹8,415 crore issued by Yes Bank were written down to zero by the Reserve Bank of India (RBI) in March 2020 as part of a restructuring plan, rendering the bonds worthless and causing huge losses to investors. Nippon India Mutual Fund is being probed by the market regulator for investing in this risky instrument. Nippon invested about 20% of total issuance. Many investors were surprised by RBI's action considering that in a bankruptcy case bondholders are often given priority over shareholders.
"Considering the large number of investors impacted and the quantum of sales achieved through this scheme, this act of the notice deserves penalty that is commensurate with the severity of violation and would be a deterrent. We hereby impose a penalty of ₹2 crore on Rana Kapoor," said Soma Majumdar, adjudicating officer, SEBI in the order.
SEBI carried out its probe between 2016 and 2020 to ascertain whether Yes Bank officials mis-sold AT1 bonds and whether institutional investors who sold the bonds to retail investors through YBL violated the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations.
The adjudicating officer noted that 1,346 individual investors had invested approximately ₹679 crore in the AT1 bonds, of which 1,311 individual investors were existing customers of YBL, who invested about ₹663 crore in these bonds.
