SAT stays Sebi penalty order in Yes Bank case

Sebi had received multiple complaints from investors of AT-1 bonds and upon investigation found that Yes Bank represented the product as a 'Super FD' and 'as safe as FD'. It also found that the term sheet was not shared with many investors and no confirmation taken from them with regard to their understanding of the features and risks associated with the bond. (Abhijit Bhatlekar/Mint) — Sebi had received multiple complaints from investors of AT-1 bonds and upon investigation found that Yes Bank represented the product as a 'Super FD' and 'as safe as FD'. It also found that the term sheet was not shared with many investors and no confirmation taken from them with regard to their understanding of the features and risks associated with the bond. (Abhijit Bhatlekar/Mint)

2 min read . Updated: 24 May 2021, 02:57 PM IST Abhinav Kaul

Sebi had on 12 April issued an order penalizing Yes Bank and three of its executives for allegedly not informing investors of risk factors while facilitating the sale of the AT-1 bonds in the secondary market

NEW DELHI : The Securities Appellate Tribunal (SAT) has imposed an interim stay on a Securities and Exchange Board of India's (Sebi's) order issued on 12 April, in which a penalty of ₹25 crore was slapped on Yes Bank, and three of its executives for allegedly not informing investors of risk factors while facilitating the sale of the AT-1 bonds in the secondary market.

After Sebi had received multiple complaints from investors of AT-1 bonds that raised questions about the selling of these instruments, it conducted an investigation of the matter to ascertain whether there was any violation of its rules.

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The investigation found that Yes Bank represented the product as a "Super FD" and "as safe as FD"; the term sheet was not shared with many investors and no confirmation taken from the investors with regard to their understanding of the features and risks associated with the bond.

In addition to Yes Bank, the former head of the bank's private wealth management team, Vivek Kanwar, was fined ₹1 crore, and two other former executives, Ashish Nasa and Jasjit Singh Banga, were fined ₹50 lakh each by the markets regulator.

"Prima facie, the question as to whether the buyers were informed of the risk factor with regard to the AT-1 bonds can be best explained by the relationship managers who were part of the investigation but were not noticees in these proceedings," the tribunal wrote in its order.

The tribunal also noted that the members of the private wealth management team have been made noticees and that they have been penalized by the impugned order. “We also prima facie find that the risk factor was already existing on the website, and it was in the knowledge of everyone. Considering the aforesaid, prima facie a case is made out for grant of an interim order," SAT added.

Subsequently, the tribunal has asked Sebi to file a reply within four weeks from date of the order (21 May). The matter is to be listed for admission and for final disposal on 30 July.

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