The Securities and Exchange Board of India (SEBI) has barred Kotak Mahindra Asset Management Company from launching any new Fixed Maturity Plan (FMP) scheme while imposing a monetary penalty of Rs 50 lakh for the alleged delay in repayment to investors of six FMP schemes that had invested in the securities of Essel Group.
In an 84-page order issued by SEBI whole time member S K Mohanty, the regulatory watchdog stated that the fund house failed to do proper due diligence while allowing the maturity period of certain securities to be extended beyond the maturity date of the scheme.
The SEBI probe was initiated after the regulator found that the investors of certain FMP schemes of the fund house were not paid their full proceeds based on the declared NAV of the said schemes as on their respective maturity dates.
“… in all fitness of things, taking into account the abysmal standard of service rendered by the Noticee (Kotak Mahindra AMC) while handling the monies of the investors of those FMP schemes, it is a deserving case for holding the Noticee liable for issuance of appropriate directions for disgorgement of a part of the management fee that it had unjustifiably charged from the unitholders of the six FMP schemes,” stated the SEBI order. The regulator has also directed the fund house to refund a part of the investment management and advisory fees collected from the unitholders of the six FMP schemes.
According to the SEBI order, the fund house approved investment in the zero coupon non-convertible debentures (ZCNCDs) of two entities - Konti Infrapower & Multiventures and Edison Utility Works - belonging to the Essel Group without considering the credit worthiness of the issuers.
It further alleged that while the issuers had pledged shares of Zee Entertainment Enterprises, the fund house extended the maturity period of the instruments after the shares of Zee Entertainment witnessed a sharp fall and the collateral value fell below the minimum prescribed level.
“It is further alleged that various events that took place from January 25, 2019 till April 04, 2019 ultimately leading to serious adverse consequences on the investments of the investors of those FMP schemes managed by the Noticee thereby adversely affecting their interests, were not communicated or disseminated to the said investors in a timely manner,” stated the SEBI order.
It further added that the investors were not paid at full NAV within 10 working days of maturity of the FMPs and the complete payments were made to the investors only in September 2019.
Also read: Bajaj Finserv gets in-principle nod to set up mutual funds arm Also read: SBI MF rolls out Balanced Advantage Fund with unique withdrawal feature; check out details