The Securities Appellate Tribunal (SAT) has granted an interim stay on markets regulator Sebi order that had slapped a penalty of Rs 25 crore on Yes Bank in a case of mis-selling AT-1 bonds.
Apart from penalising Yes Bank, Sebi, in its order in April, imposed a fine of Rs 1 crore on Vivek Kanwar, who was the head of the private wealth management team, and Rs 50 lakh each on Ashish Nasa and Jasjit Singh Banga.
The two individuals were part of the private wealth management team at the time of the violation.
Sebi alleged misrepresentation by the bank and certain officials for not informing investors of the risk involved while selling the AT -1 (Additional Tier-1) bonds in the secondary market.
While granting interim relief to Yes Bank, SAT said it has “stayed the effect and operation of the impugned order”.
This is subject to an undertaking by Yes Bank that in the event of failure of the appeal, the lender would pay the penalty amount within two weeks from the date of the order, SAT said in an order passed on May 21.
Also, the tribunal said it had directed Sebi to file a reply within 4 weeks; thereafter, the bank needs to file a rejoinder. The matter has been listed for admission and final disposal on July 30.
The order comes following appeals filed by Yes Bank, Kanwar and others.
The tribunal noted that the central government imposed a moratorium on Yes Bank and appointed an administrator, superseding the board of directors.
“The bank is under a rehabilitation scheme, and lots of money are being pumped to revive the bank,” it pointed out.
In addition, the tribunal said that “the Relationship Manager has not been booked. Prima facie, the question as to whether the buyers were informed of the risk factor concerning the AT-1 Bonds can be best explained by the Relationship Managers who were part of the investigation but were not the noticees in these proceedings”.
On the other hand, the members of the private wealth management team have been made noticees and Sebi has penalised them, it noted.
“We also prima facie find that the risk factor was already existing on the website and it was in the knowledge of everyone. Considering the aforesaid, prima facie a case is made out for grant of an interim order,” it added.
Yes Bank, whose board of directors were reconstituted and fresh capital was infused in 2020, had issued AT-1 bonds like debentures in December 2013, December 2016 and October 2017.
The AT-1 bonds, issued in 2016 and 2017, were written down as part of reviving the cash-strapped bank last year.
According to Sebi order, Yes Bank and certain officials devised the “devious scheme to dump the AT-1 bonds on their hapless customers”.
To make institutional investors subscribe to more capital of Yes Bank and three officials (Kanwar, Nasa and Banga) devised the plan to down-sell the AT-1 bonds, held by the institutional investors, to individual investors, including their customers Sebi had said in its order.
In this regard, they highlighted the AT-1 bonds as earning high interest vis-a-vis the fixed deposits (FDs), it had added.