SEBI Probing Nippon Mutual Fund investments in Yes Bank on Suspicion of Misuse of Investor Money: Report
Moneylife Digital Team 20 January 2023
Market regulator Securities and Exchange Board of India (SEBI) is reportedly probing investments between Nippon India Mutual Fund and Yes Bank between 2016 and 2019 for suspected misuse of investors' money. 
 
Quoting sources with direct knowledge of the matter, a report from Reuters says, SEBI is probing whether investments by the fund, known at the time as Reliance Mutual Fund, in perpetual bonds of Yes Bank were made as part of a deal whereby in return the lender invested in securities of Anil Ambani group companies. 
 
"If the regulator's probe results in charges against the fund, its officials or the Bank, it could lead to penalties ranging from restrictions on accessing capital markets to monetary penalties. The current owner of the fund, Nippon India, as well as the previous owner, could be liable," the sources told the newswire.
 
The sources also told Reuters that the fund house itself, senior officials and its former sponsor could face charges for violating regulatory norms under SEBI's prevention of fraud and unfair trade practices relating to securities market rules and Yes Bank and its former officials could also face charges.
 
Reliance Nippon Life Asset Management had one of the biggest exposures to Yes Bank's AT-1 bond. According to news reports, the Anil Ambani-led group had borrowed from Yes Bank to the extent of over Rs12,000 crore. In April 2021, Reliance Infrastructure sold its headquarters in Santacruz, Mumbai, to Yes Bank for Rs1,200 crore. 
 
Last year in April, SEBI launched an investigation into Nippon Life India Asset Management (NAM) 's—formerly known as Reliance Mutual Fund—investment in the bonds, which were influenced by its former promoter Anil Ambani-led Reliance Capital. NAM had invested Rs2,500 crore in Yes Bank's AT1 bonds.
 
In a statement at that time, NAM had said, "SEBI has been asking the company and its executives' certain information with respect to the aforesaid investment as well as information with respect to certain third parties, as may be available with us." (Read: Nippon India MF: Cooperating with SEBI in Yes Bank AT1 Bond Matter)
 
In September last year, SEBI imposed a penalty of Rs2 crore on Yes Bank's former managing director (MD) and chief executive officer (CEO) Rana Kapoor in the additional tier-1 bonds (AT-1 bonds) mis-selling case. The case pertains to Yes Bank executives allegedly selling AT-1 bonds to investors under the guise of super FDs (fixed deposits), promising higher returns and the safety of a typical bank FD. (Read: Yes Bank AT1 Bonds: SEBI Imposes Rs2 Crore Penalty on Rana Kapoor)
 
It may be recalled that institutional investors such as mutual funds, including Reliance Nippon, and individuals had put as much as Rs8,415 crore in Yes Bank's AT-1 bonds, which are perpetual bonds without any maturity date. These securities were written down to zero in March 2020 as part of a government-approved restructuring plan for the insolvent lender, resulting in investors losing money.
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