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SEBI imposes Rs 5 lakh penalty on Axis Bank for violating merchant banking norms

The regulator conducted an examination of debt market operations of Axis Bank between August 2016 to August 2019 and found the bank to be in violation of provisions of Regulation 27 of SEBI (Merchant Bankers) Regulations, 1992.

March 24, 2022 / 08:21 PM IST
 
 
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The Securities and Exchange Board of India (SEBI) on March 24 imposed a Rs 5-lakh fine on Axis Bank for violating merchant banking norms, the markets regulator said in an order.

SEBI said it conducted an examination of debt market operations of Axis Bank between August 2016 to August 2019 and found the bank to be in violation of provisions of Regulation 27 of SEBI (Merchant Bankers) Regulations, 1992.

The market regulator said Axis Bank during the course of a three-year period, while acting as a merchant banker for 22 entities, subscribed to debt papers of nine companies without informing SEBI about the same 15 days from date of investment, as is the norm.

Dewan Housing Finance, Indiabulls Housing Finance, Reliance Home Finance, Shriram Transport Finance, ECL Finance, L&T Finance and Tata Capital Finance were the non-banking finance companies whose securities Axis Bank had acquired while acting as the merchant banker and without prior intimation to SEBI.

When asked by SEBI as to why the lender must not be penalised for violating norms, Axis Bank acknowledged that it had failed to comply with reporting norms. However, the bank pleaded that this was an inadvertent violation which it proactively reported to SEBI and said it was taking prompt measures to prevent such violations. “We request forbearance in the matter and request for personal hearing to explain the above in detail,” the lender’s response to SEBI read.

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SEBI allowed Axis Bank to present its case in a personal hearing and the lender presented its case to the regulator via its lawyers. Later, Axis Bank mentioned that it has decided to settle the proceedings by filing an application with the regulator. The SEBI, however, rejected the settlement application and asked Axis Bank to provide further submissions in the case.

Axis Bank, in another submission to SEBI, again acknowledged that it has violated merchant banking protocol but sought some forbearance from the regulator by saying that the said nine issues constitute only a small proportion of whole merchant banking transactions. The violation must have occurred due to concerned bank official dealing with both merchant banking and investment functions of the bank, the lender said.

“No loss or prejudice was reported by any investor on account of the inadvertent omission on the part of the Noticee (Axis Bank) to inform SEBI regarding its participation in 9 out of 22 issues. In the light of the above and considering the proactive manner in which it sought to rectify the omissions, the Noticee submits that it ought to be given the benefit of the doubt and discharged from the present proceedings,” the lender pleaded with SEBI.

The SEBI, however, found these violations material enough to warrant a penalty. The market regulator has asked Axis Bank to pay Rs 5 lakh within 45 days.
Piyush Shukla
first published: Mar 24, 2022 06:57 pm
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