Sebi imposes Rs 25 crore penalty on YES Bank in AT1 Bonds case - Moneycontrol.com

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Market regulator, Securities and Exchange Board of India (Sebi), on April 12 imposed a monetary penalty of Rs 25 crore on private sector lender, YES Bank in the additional tier 1 bonds (AT1) misselling case

The case pertains to YES Bank executives allegedly selling AT1 bonds to investors under the guise of Super FDs promising higher returns and safety of a typical bank FD

YES Bank, which was bailed out in March last year by a bank consortium led by State Bank of India (SBI), wrote off Rs 8,415 crore of AT1 bonds as per the framework of the YES Bank reconstruction scheme

Following this, investors moved Courts alleging that they were sold these bonds by the bank on false assurances and hence the investors need to be compensated by the bank

After the YES Bank reconstruction scheme was notified by the government, there was a confusion in the market on March 14 on whether the AT1 bonds will be honoured or extinguished as said in the draft reconstruction scheme made public by RBI

This is because the reconstruction scheme was formed after the RBI invoked Section 45 of the Banking Regulation Act, 1949, which arises when the bank is deemed to be non-viable or approaching non-viability, enabling the write-down of certain Basel III AT1 Bonds, Kumar said

The Sebi investigation has observed that YES Bank officials didn’t follow the proper procedures while selling these bonds to investors including not sharing the term sheets with the individual investors

“The investigation also observed that the down-sell of AT1 bonds were not negotiated between buyers and sellers individually

The same as facilitated by YES Bank for around 1300 individual investors most of which were existing customers of YES Bank,” the Sebi investigation observed

Also, no confirmation was taken from the investors with respect to their understanding of the features and risks associated with the bond, the investigation observed

The investigation also observed that the push from the MD &CEO of YBL to down sell the AT1 Bonds which led the private wealth management team to recklessly sell the bonds to individual investors

After examining the responses, Sebi observed that “AT1 Bonds were sold to the customers of YBL without adopting adequate safeguards to protect their interests and without sufficient due diligence,” Sebi order said and that the allegations that YES Bank sold AT1 bonds to investors, representing as Super FDs, is established