The Security and Exchange Board of India (SEBI) has on Monday imposed a monetary penalty of Rs. 25 crore on YES Bank Limited for allegedly mis-selling of its AT-1 Bonds to its own customers/investors.
Three former senior executives of Yes Bank who were part of the private wealth management group in the bank were also fined Rs.50 lakh to Rs. 1 crore by SEBI.
The private lender, Yes Bank said that it will move the Securities Appellate Tribunal against the SEBI’s order.
SEBI observed that the Noticees had facilitated selling of AT-1 Bonds of YBL from Institutional Investors to Individual Investors. It was alleged that during the process of selling of the AT-1 Bonds, Individual Investors were not informed about all the risks involved in subscription of AT-1 Bonds. Therefore, it was alleged that the AT-1 Bonds were fraudulently sold to the individual investors and in this regard, Noticees1 to 5have alleged to have violated the provisions of Sections 12A(b) and 12A(c) of the SEBI Act and Regulations 3(a), 3(c), 3(d), 4(1) and 4(2)(s) of PFUTP Regulations read with Explanation (1) to Regulation 4(2) of the PFUTP Regulations. Therefore, SEBI initiated the instant adjudication proceedings against Noticees 1 to 5 under the provisions of Section 15HA of the SEBI Act.
SEBI had received several complaints from investors in AT-1 bonds issued by Yes Bank. It conducted an investigation and found that AT-1 bonds of Yes Bank were sold to retail investors between 1 December 2016 and 29 February 2020.
The Adjudicating Officer, Soma Majumder further stated:
“I note that it being a company, acted through its employees including Noticees 2 to 4 to perpetrate such fraudulent acts on its hapless and unsuspecting customers, some of whom were influenced to even alter their investment positions from FDs to these risky AT1 bonds. It is understood that more of such complaints are being received in SEBI even after initiation of these proceedings. Therefore, on account of such misrepresentation and fraud perpetrated on its own customers which lured them and induced them to buy these risky AT1 bonds and also induced some of them to alter their position from FDs to these AT1 bonds, such acts have to be viewed seriously. Therefore, I consider a penalty of Rs. 25 Crores (Rupees Twenty-five Crores only) on Noticee 1 in terms of Section 15HA of SEBI Act is justified as it is commensurate with the violations and will also have a deterrent effect.”
The Market regulator has asked the bank to pay the penalty amount within 45 days of receipt of the notice.