Sebi fines Yes Bank for fraudulent sale of riskier bonds – Times of India

MUMBAI: India’s market regulator on Monday fined Yes Bank Ltd Rs 25 crore ($3.33 million), saying it had fraudulently offered sure dangerous bonds to mother-and-pop buyers with out the required warnings and danger assessments.
Yes Bank “deliberately misrepresented” its so-referred to as AT1 bonds as being extra enticing than fastened deposits by suppressing dangers and distorting details, manipulating clients into investing in these dangerous property, the Securities and Exchange Board of India (Sebi) stated in an order.
AT1 bonds have quasi-fairness traits and sometimes carry increased rates of interest than extra senior debt as buyers danger dropping their funding if the funds are wanted to bolster a financial institution’s capital.
A revival plan for debt-laden Yes Bank final yr noticed its AT1 bonds totally written down, hurting many retail buyers. Yes Bank had about Rs 8,800 crore ($1.2 billion) in AT1 capital as of March 2019.
There was “clear mala fide intent” on the half of Yes Bank in promoting the bonds to its clients, together with these with a low danger urge for food and people of very superior age, Sebi stated.
Yes Bank declined to remark.
The lender, in its submission to Sebi, stated the danger components had been communicated to buyers both orally or in written paperwork.
Yes Bank additionally stated that there was no have to assess the danger profile of potential buyers as AT1 bonds had been thought-about low danger on condition that there was no indication on the time that the financial institution would fail and the bonds must be written down.
Last yr, Sebi restricted investments in such bonds to certified institutional buyers and raised their allotment and buying and selling lot sizes to Rs 1 crore.