The Securities and Exchange Board of India (SEBI) has fined seven individuals and entities, including JM Financial Asset Management Ltd and its former CEO Bhanu Katoch, a total of INR 2 crore for regulatory breaches involving Dewan Housing Finance Corporation Ltd (DHFL) securities. Violations included trading on unpublished information and failing to disclose NAV changes promptly. Fines are due within 45 days, with Katoch facing INR 1.1 crore, his family members INR 17 lakh and INR 8 lakh, and other executives receiving penalties. This case underscores the need for transparency and ethical practices in India's financial sector.
The Securities and Exchange Board of India (SEBI) has imposed a total penalty of INR 2 crore on seven individuals and entities, including JM Financial Asset Management Ltd, its trustee, and former CEO Bhanu Katoch. This decision comes after findings of regulatory violations related to investments in securities linked to Dewan Housing Finance Corporation Ltd (DHFL). The penalties must be settled within 45 days as per SEBI's directive.
The breakdown of the fines includes INR 25 lakh on JM Financial Asset Management, INR 10 lakh on JM Financial Trustee Company, and a significant INR 1.1 crore levied against Katoch himself. Additional penalties were imposed on other involved parties, including INR 17 lakh on Katoch’s mother, Swarn Lata Katoch, and INR 8 lakh on his wife, Sharika Kher. Deepen Doshi, who headed institutional sales, was fined INR 22 lakh, with his mother, Aruna Doshi, receiving a penalty of INR 9 lakh.
The primary violation centres on the use of unpublished information regarding the sale of DHFL securities, which had been defaulted. The penalised individuals made investments in JM Financial Mutual Fund schemes based on this insider knowledge before informing unit holders. SEBI stated that these actions constituted unfair trading practices and put the interests of the executives ahead of the investors they were supposed to serve. This misuse of position raises serious ethical concerns regarding corporate governance in the financial services industry.
Further investigation revealed that both JM Financial Asset Management and JM Financial Trustee Company failed to provide timely disclosures to unit holders regarding changes in the Net Asset Value (NAV) of their funds. The significant rise in NAV, reported to be 19.9%, was primarily a result of the sale of the defaulted securities. Although an annual report disclosed these details several months later, SEBI has emphasised the importance of immediate communication to investors, especially when changes affect their investments directly.
This case has broader implications for the financial sector, highlighting the importance of transparency and adherence to regulatory guidelines. The regulatory environment in India has been tightening, especially following high-profile cases involving financial misconduct. SEBI’s actions portray its commitment to safeguarding investor interests and maintaining the integrity of the capital markets.
This enforcement action serves as a wake-up call for the financial services community, reinforcing that breaches of trust will meet with significant repercussions. Investors are encouraged to be vigilant and informed about the operations of the funds they invest in, especially when it comes to the handling and valuation of their assets.
This article has been revised on 14th August 2024 to reflect corrections made to the total sum of the fine and the individuals being penalised.
Advertisement
Facebook
Whatsapp
