Sebi slaps Rs 25 crore fine on Yes Bank in AT-1 bonds case

Individual buyers were not told of any of the risks associated with purchasing AT-1 bonds during the sale period.

Yes Bank was fined Rs 25 crore by the markets regulator Sebi on Monday for misselling the lender’s AT-1 bonds a few years back.

The watchdog fined Vivek Kanwar, the head of the private wealth management team, Rs 1 crore, and Ashish Nasa and Jasjit Singh Banga each Rs 50 lakh. At the time of the breach, the two parties were members of the private wealth management team.

According to Sebi’s order, they must pay the penalty within 45 days.

The “devious plan to throw the AT-1 (Additional Tier-1) bonds on their hapless customers” was conceived by Yes Bank Ltd (YBL) and some officials, according to the regulator.

The notices devised a scheme to down-sell the AT-1 bonds owned by institutional investors to private investors, including their clients, to encourage them to subscribe to more resources in YBL. They highlighted AT-1 bonds as receiving higher interest than Fixed Deposits (FDs) in this respect, according to Sebi.

YBL, Kanwar, Nasa, and Banga are the notices.

Individual buyers were not told of any of the risks associated with purchasing AT-1 bonds during the sale period.

“The noticees’ failure to send pertinent documentary evidence to investors/customers suggests suppression of factual data to give the AT-1 bonds a false look to entice investors/customers to invest in them,” it added.

According to Sebi, their misrepresentation swayed YBL investors/customers, and they were duped into buying the bonds. Some buyers also closed their FDs and used the funds to purchase AT-1 shares.

According to Sebi, both of their acts amount to a scam on the investors.

“Subsequent events, such as YBL’s financial insolvency, which resulted in the AT-1 bonds being written down, show that the warnings were well aware of the AT-1 bonds’ precarious value. Despite this, they actively pursued downselling these bonds to buyers and consumers, according to the watchdog.

They were breaking the PFUTP clause by engaging in certain operations, according to Sebi (Prohibition of Fraudulent and Unfair Trade Practices).

According to the show-cause notice, 1,346 individual investors invested approximately Rs 679 crore in the AT-1 bonds, with 1,311 of them being YBL current customers who invested approximately Rs 663 crore.

According to the regulator, 277 customers who had FDs with the bank prematurely closed their current FDs and reinvested a sum of Rs 80 crore in the AT-1 bonds, which were later written down.

The Securities and Exchange Board of India (Sebi) launched an investigation into the matter to see whether there was any breach of regulatory norms in the sale of these AT-1 bonds by Yes Bank to retail investors by the noticees between December 1, 2016, and February 29, 2020.

The decision was made in response to several customer concerns about the bank’s AT-1 shares.

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