The Securities and Exchange Board (SEBI) has turned down a settlement proposal from industrialist Anil Ambani regarding charges linked to investments in Yes Bank, placing him at risk of a $208.4 million penalty. SEBI’s investigation uncovered that Ambani’s Reliance Mutual Fund invested $245.3 million in Yes Bank’s additional Tier-1 bonds before the bank’s 2020 insolvency.
The investments, made between 2016 and 2019, were allegedly contingent on loans granted by Yes Bank to other Ambani group companies. SEBI’s findings suggest that these investments were characterised as a ‘bilateral relationship deal’, implicating both Anil Ambani and his son Jai Anmol Ambani in exerting undue influence over investment decisions through Sundeep Sikka, the fund’s chief executive.
SEBI, having rejected the settlement plea, emphasised the significant loss to investor wealth caused by the fund’s actions, estimated at $208.4 million. The case is rooted in the alleged non-compliance with internal policies during investment decisions, which SEBI states had a ‘market wide impact’.
The regulatory body has informed Ambani and his son of forthcoming directives for compensating affected investors. Further actions may include imposing financial penalties. “SEBI has also shared its findings with the Enforcement Directorate,” two sources with direct knowledge of the matter said, as per a report in Reuters.
In a broader context, Anil Ambani faces heightened scrutiny following the insolvency of Yes Bank, a lender previously involved with Ambani’s firms. This situation has drawn attention from authorities, with recent investigations into a scheme to misappropriate $342.3 million in loans from Yes Bank.
The charges against Ambani extend to the executive team of the fund house, including the chief executive, chief investment officer, and former chief risk officer, who have also submitted a settlement application worth $1.08 million, currently under review. SEBI documents noted, “There were lapses and non-compliance in adherence with the laid down internal policy and procedure and also bypassing the internal risk/control framework while enhancing the sub-limit and making the investment.”
The mutual fund in question, sold to Nippon Life Insurance in 2019, pre-dates the alleged misconduct linked to the investments.
(With Reuters inputs)
