Securities and Exchange Board of India (Sebi), on April 12 imposed a monetary penalty of Rs 25 crore on private sector lender, YES Bank in the additional tier 1 bonds (AT1) misselling case.
Regulator has also imposed penalties on Vivek Kanwar (Rs 1
About Case
YES Bank, which was bailed out in March last year by a bank consortium wrote off Rs 8,415 crore of AT1 bonds as per the framework of the YES Bank reconstruction scheme.
Beyond this executives allegedly selling AT1 bonds to investors under the guise of Super FDs promising higher returns and safety of a typical bank FD.
Following this, investors moved Courts alleging that they were sold these bonds by the bank on false assurances and hence the investors need to be compensated by the bank.
Besides retail investors, institutional investors such as Indiabulls, 63 Moons Technologies have also moved courts.
Both YES Bank and the RBI have so far maintained that the AT1 bond write off is as per the Basel III rules.
Deadline
SEBI has set the deadline for the bank to pay the penalty amount within 45 days of receipt of the notice.
Yes Bank reacted
Yes Bank on Monday said it will move the Securities Appellate Tribunal against a ₹25 crore fine imposed by Sebi for allegedly mis-selling its AT-1 bonds.
As per the bank’s filing, Additional Tier 1 (AT-1) bonds were issued in three tranches in 2013, 2016 and 2017.
Inspection by SEBI
SEBI examined the complaints under its Prohibition of Fraudulent and Unfair Trade Practices regulations.
It stated that these bonds were sold to retail customers as “super FDs” and they were compared with fixed deposit on interest rate differential, while omitting the risk differential.
“More than 97% of the investors of these AT-1 bonds were existing customers of Noticee 1 (Yes Bank). It’s also a matter of record that out of 1,311 customers, 277 customers had prematurely closed their fixed deposit accounts and invested the withdrawn amount in AT-1 bonds.” – SEBI Order.
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