SEBI imposes Rs40 lakhs fine on Kotak AMC

1 Jul 2022 , 02:35 PM

SEBI has imposed a fine of Rs 40 lakhs on Kotak Asset Management Company (AMC). A fine of Rs 30 Lakhs has been imposed on Nilesh Shah, its MD. Another fine of Rs 25 lakhs has been imposed on Laxmi Iyer, its chief investment officer for debt category.

The above fines have been levied for violation of mutual fund rules and not acting in the interest of investors. SEBI has said that Kotak AMC did not act in the interests of its investors when it entered into an agreement with the promoters of Essel Group to extend the maturity of the company's debt securities in which Kotak AMC had invested in, to 30th September 2019. Due to this extension, investors were not paid the full Net Asset Value (NAV) that was due at the time of original maturity.

SEBI has also stated that for this extension agreement, the collateral taken was shares of Zee Entertainment. Given the value of these shares at that time, they amounted to 1.6 times the value of debt exposure. SEBI has said that this collateral amount was inadequate given the nature and credit risk of the debt exposure. SEBI has also stated that this transation was more in the nature of loan against shares rather than investment in debt securities by a mutual fund.