SEBI Imposes Penalty of Rs. 1 Lakh on NJ AMC for Violating Portfolio Manager Regulations
SEBI Imposes Penalty of Rs. 1 Lakh on NJ AMC for Violating Portfolio Manager Regulations
The Securities and Exchange Board of India (SEBI) has penalized NJ Asset Management Company (AMC) in a case pertaining to violation of portfolio manager regulations.
The SEBI conducted an inspection of NJ Asset Management Private Limited (hereinafter referred to as ‘Noticee’ or ‘NJAMPL’), registered with SEBI as Portfolio Manager under SEBI (Portfolio Managers) Regulations, 2020 (hereinafter referred to as ‘PM Regulations’).
A Show Cause Notice dated 24 March, 2023 (hereafter referred to as SCN) was issued to the Noticee. The allegation levelled against Noticee in the SCN was that Noticee accepted initial investment, without meeting the minimum investment criteria as prescribed in PM Regulations, from its clients in 13 instances. Further, Noticee accepted additional funds below regulatory threshold from five (5) existing clients in six (6) instances. The same allegedly resulted in violation of provisions of Regulation 23 (2) of PM Regulations by Noticee.
On April 19, 2023, Neeraj Choksi, Director, Rajiv Shastri, CEO, Vineet Nayyar, COO and Punam Upadhyay, Chief Compliance officer and Company Secretary attended the hearing and made submissions.
The Adjudicating Officer, Amit Kapoor noted that the PM Regulations were notified on January 16, 2020. Regulation 2 of PM Regulation states that these regulations shall come into force on the date of their publication in the Official Gazette. He further noted from the available records that said regulations were published in the official Gazette on January 21, 2020.
In this vein, the SEBI on examining the information/data provided by Noticee noted that the “Funds realization date” in respect of 13 instances as alleged in the SCN, were on or after January 21, 2020 i.e., date of Gazette publication.
“Therefore, I am of the view that Noticee should have complied with the new regulatory minimum investment criteria before accepting investment from clients. Noticee’s contention that contracts with clients were signed and executed before the regulatory changes became effective is not acceptable, as the agreement cannot be executed in violation of applicable provisions,” the SEBI observed.
Further, with respect to 6 instances of top-up investment, SEBI noted that the Noticee had not met the minimum investment criteria, and neither provided any satisfactory explanation except stating that such lapses happened due to disruption caused by nationwide locked for curtailing the Covid-19 pandemic and processing error was due to work from home situation and operational difficulties faced during pandemic period.
SEBI opined that, it was conclusively established that Noticee had failed to comply with minimum investment criteria as prescribed under Regulation 23 (2) of PM Regulations.
Accordingly, the SEBI imposed a penalty amounting to Rs. 1 lakh and has directed NJ Asset Management Private Limited to pay the said amount of penalty within 45 days.
