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Former YES Bank MD, Rana Kapoor is penalised by SEBI in the AT1 bond case with a fine of Rs 2 crore

Rana Kapoor, the former managing director of Yes Bank, has been fined Rs 2 crore by the Securities and Exchange Board of India (SEBI) for allegedly misselling the Additional Tier 1 Bonds (AT1 bonds) to retail investors. 

The capital market regulator claims that Kapoor, who served as the bank’s managing director from 2004 to 2019, gave the order to the lender’s private wealth management division to resale AT1 bonds from institutional investors to retail investors.

More importantly, the investigation revealed that ordinary investors were not educated about the dangers of buying bonds.

“The scope of the investigation was to ascertain whether the AT1 bonds of YBL (Yes Bank Limited) issued initially to institutional investors were miss-sold to retail investors by YBL officials and to ascertain whether the sale of AT1 bonds by institutional investors which sold such bonds to retail investors through YBL resulted in violations of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003,” stated the 87-page order issued by SEBI.

“During the investigation, SEBI observed that under the instructions of Mr Rana Kapoor… Mr Vivek Kanwar, head of Private Wealth Management Team… Mr Ashish Nasa and Mr Jasjit Singh Banga, who were part of the PWM Team at the relevant time facilitated (designed the process) reselling of AT1 Bonds of YBL, from institutional Investors to individual investors,” it added.

According to the SEBI notification, 1,346 individual investors invested roughly Rs 679 crore in the AT1 bonds, 1,311 of whom were current Yes Bank customers and made investments totalling roughly Rs 663 crore.

Additionally, 277 customers prematurely cancelled their current FDs with Yes Bank in order to reinvest a total of Rs 80 crore in these AT1 bonds, which were ultimately wiped off. Beginning in 2016, the sale of AT1 bonds lasted until 2019.
“Further, SEBI observed that during the process of reselling of AT1 Bonds, the individual investors were not informed about all the risks involved in subscription of AT1 Bonds as required,” stated the SEBI order.

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