Relief for Yes Bank in AT-1 bonds case: Securities Appellate Tribunal imposes interim stay on SEBI penalty order

A screen logged into the yes bank mobile application infront of the yes bank board. (Source: ShutterStock)

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26 Aug, 2025 12:21

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In a temporary reprieve for Yes Bank in the AT-1 (additional tier-1) bonds case, the Securities Appellate Tribunal (SAT) has imposed an interim stay on an earlier Securities and Exchange Board of India (SEBI) order which had slapped a monetary penalty of Rs 25 crore on Yes Bank, and three of its executive--Rs One crore on Vivek Kanwar and Rs 50 lakh each on Ashish Nasa and Jasjit Singh Banga.

The market regulator had alleged misrepresentation and fraud by the bank for not informing investors of risk factors while facilitating the sale of the AT -1 bonds in the secondary market.

Also Read: Yes Bank AT1 bonds case: Does Sebi order pits the market regulator against the RBI?

SAT has directed SEBI to file a reply within four weeks and three weeks thereafter, Yes Bank is required to file a rejoinder. The case has been posted for admission and final disposal on 31^st  July 2021, according to the order uploaded on the SAT website.

The interim stay order by SAT is subject to an undertaking by Yes Bank that in the event of failure of the appeal, it would pay the penalty amount within two weeks from the  date of the order

Why did SAT impose an interim stay?

At the outset, the SAT order said, “We find that under the Banking Regulation Act, 1949 the Central Government had declared a moratorium in March 2020 and thereafter propounded a scheme pursuant to which an Administrator has been appointed. The bank is under a rehabilitation scheme and lots of monies are being pumped in order to revive the bank.”

Also Read: Yes Bank saga: Rs 8,415 crore at stake, will AT1 bond holders ever get their money back?

Explaining its rationale for the interim stay, the SAT order said, “We also find that the relationship manager have not been booked. Prima facie, the question as to whether the buyers were informed of the risk factor with regard to the AT-1 Bonds can be best explained by the Relationship Managers which were part of the investigation but were not the noticees in these proceedings. On the other hand, the members of the Private Wealth Management Team have been made noticees and they have been penalized by the impugned order.”

It further added, “ We also prima facie find that the risk factor was already existing on the website and it was in the knowledge of everyone. Considering the aforesaid, prima facie a case is made out for grant of an interim order.”

What is the case?

The case pertains to Yes Bank executives allegedly selling AT-1 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 AT-1 bonds as per the framework of the YES Bank reconstruction scheme. AT-1 Bond are a type of perpetual bonds banks use to raise funds.

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. The case is ongoing in Bombay High Court. Both YES Bank and the RBI have so far maintained that the AT-1 bond write-off is as per the Basel III rules. Besides retail investors, institutional investors such as Indiabulls, 63 Moons Technologies have also moved courts.

What did the SEBI probe find?

SEBI has imposed penalties under Section 15-I of the Sebi Act. If the penalties are not paid within 45 days, Sebi will initiate the recovery process, the order issued by adjudicating officer, Soma Majumdar, said.

After an investigation, Sebi issued show cause notices to all parties in October 2020. 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.

SEBI further observed that YBL represented AT1 Bonds as Super FD and ‘as safe as FD’. 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 AT-1 bonds which led the private wealth management team to recklessly sell the bonds to individual investors.

After examining the responses, SEBI observed that “AT-1 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 AT-1 bonds to investors, representing as Super FDs, is established.

In the replies to Sebi notices, YES Bank denied that it engaged in misselling of AT-1 Bonds to investors.