Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹10 lakh on Axis Trustee Services Ltd for failing to ensure the timely disclosure of a crucial regulatory order in the Embassy Office Parks REIT matter, highlighting serious lapses in oversight and compliance.
The action stems from SEBI adjudication proceedings examining whether the trustee fulfilled its regulatory responsibilities after an order passed by the National Financial Reporting Authority (NFRA) against Aravind Maiya, the then chief executive officer (CEO) of the REIT’s manager.
NFRA, in its order dated 19 August 2024, had found Mr Maiya guilty of professional misconduct in his earlier role as an auditor and imposed a penalty of ₹50 lakh along with a 10-year debarment from audit-related roles. Despite the seriousness of these findings, SEBI noted that the disclosure of this material development to unit holders and stock exchanges was delayed by 53 days.
According to SEBI, Axis Trustee, as the trustee of Embassy REIT, had a clear and proactive obligation under REIT regulations to ensure that the manager made timely and accurate disclosures. While the Trustee argued that the primary responsibility for disclosure lies with the manager, SEBI emphasised that the Trustee’s role is not merely passive but requires urgent corrective action in the event of delays or discrepancies.
The regulator observed that Axis Trustee failed to act with the required urgency. Although it became aware of the NFRA order on 20 August 2024, it did not immediately direct disclosure. Instead, it engaged in prolonged correspondence with the manager and did not explicitly advise disclosure until nearly two weeks later. Even communication to SEBI about the non-disclosure was not immediate, falling short of regulatory expectations.
SEBI further held that the Trustee did not independently assess the materiality of the NFRA order in a timely manner and relied excessively on the manager’s stance and legal opinions. This, the regulator says, undermined the Trustee’s fiduciary responsibility to protect investor interests and ensure transparency.
The SEBI action against Axis Trustee Services comes in the backdrop of wider regulatory scrutiny in the Embassy Office Parks REIT matter, particularly following findings against Mr Maiya. In a related development, SEBI had earlier directed the REIT to suspend him after NFRA found him guilty of professional misconduct, raising serious concerns about governance and leadership integrity within the REIT structure.
As reported earlier, SEBI underscored that such findings had a direct bearing on investor confidence and required immediate disclosure to unit holders and stock exchanges. The delay in disclosure of the NFRA order, which eventually triggered the penalty on Axis Trustee, reflects systemic gaps in oversight and reinforces the regulator’s emphasis on timely transparency and accountability in REIT governance. (Read:
SEBI Asks Embassy Office Park To Suspend CEO Aravind Maiya, Found Guilty in Cafe Coffee Day Audit Lapses)
Rejecting the trustee’s defence that it lacked enforcement powers, SEBI clarified that the issue at hand was not about making disclosures directly, but about ensuring that disclosures were made promptly. The regulator underscored that the obligation to act “on an urgent basis” is a mandatory requirement under the REIT framework.
The case also highlights broader concerns about governance standards in REIT structures, particularly the effectiveness of trustees in exercising independent oversight over managers. SEBI reiterated that trustees are expected to maintain high standards of diligence, integrity and investor protection.
This order reinforces SEBI’s stance that intermediaries cannot rely on technical interpretations or procedural limitations to justify delays in critical disclosures, especially when such information has a direct bearing on the integrity and competence of key managerial personnel.
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