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SEBI Fines Yes Bank, Three Others for Mis-selling AT1 Bonds—Rs 25 Cr fine.

 SEBI says Yes Bank misled individual investors into buying risky AT1 bonds and did not inform them of the risks involved or conduct risk profiling.

SEBI (Securities and Exchange Board of India) has fined Yes Bank and three members of its private wealth management team for misselling AT1 (additional tier 1) bonds.

The regulator SEBI fined Yes Bank INR 250 million, while the former head of its private wealth management team Vivek Kanwar was fined INR 10 million.

Two other former members of the private wealth management team, Ashish Nasa and Jasjit Singh Banga were fined INR 5 million each.

Yes Bank said it would appeal against the SEBI decisions.

SEBI issued the notices of fines after an investigation found that Yes Bank and three individuals misled and manipulated investors into buying risky AT1 bonds, and facilitated the sale of the bonds from institutional investors to individuals.

“It was alleged that during the process of selling bonds, individual investors weren’t informed about all the risks involved in subscription of AT1 bonds,” the order says.

SEBI says Yes Bank misrepresented the product as a ‘Super FD’ (i.e. ‘as safe as a fixed deposit’). The term sheet was also not shared with many investors and no confirmation was taken from the customers on their understanding of the product’s features and the risks associated with the AT1 bonds.

In addition, Yes Bank failed to conduct risk profiling of individual clients aged between 70 and 90 years. “There was a push from the chief executive of the bank to down-sell AT1 bonds which led the private wealth management team to recklessly sell the bonds to individual investors,” SEBI said.

Last month, the Mumbai high court granted time to the RBI (Reserve Bank of India) and SEBI to file their responses to a petition from individual holders of Yes Bank AT1 bonds. The bondholders had approached the court in February claiming that the sale of bonds was illegal and urging the court to direct Yes Bank to deposit INR 1.6 billion with the court pending a decision in the case.

While investing in such bonds, a careful evaluation of the risks involved should be done by professional Investment Advisors and that should be made known to all the investors in a transparent and simple manner so that the small, retail, and gullible investors do not fall prey to such unscrupulous Fund raisers’ greed to mobilize money at the cost of the naïve investors.

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