SEBI imposes ₹29L fine on India Asset Growth Fund, trustee
What's the story
The Securities and Exchange Board of India (SEBI) has imposed a total penalty of ₹29 lakh on India Asset Growth Fund (IAGF), its manager, Essel Finance Advisors and Managers (EFAM), and trustee Vistra ITCL (India). Fines have also been imposed on Vistra ITCL's key personnel, including Arpan Sarkar, Jaykishan Kikani, and Vishnu Prakash Rathore. The fines were imposed for multiple violations of Alternative Investment Fund (AIF) rules.
Information
Breakdown of SEBI's penalties
The regulator imposed penalties of ₹11 lakh on IAGF, ₹10 lakh on Sarkar and Kikani (jointly), ₹6 lakh on Vistra ITCL (India), and ₹2 lakh on EFAM and its CEO Rathore (jointly).
Compliance issues
Entities guilty of serious lapses in regulatory compliance
SEBI's order, running into 39 pages, found the entities guilty of serious lapses in regulatory compliance during the inspection period from April 2021 to March 2022. The regulator noted that IAGF failed to disclose the disciplinary actions and litigation history of its sponsor, manager, trustee, and key officials in its placement memorandum (PPM), as required under the rules.
Disclosure violations
Other violations observed by SEBI
IAGF submitted a revised PPM with such disclosures during a change of control application. However, this was neither approved nor circulated to investors, violating the disclosure framework of the code of conduct under AIF regulations. SEBI also criticized IAGF for valuing assets based on underlying assets instead of securities held. Other violations included delayed registration with the Financial Intelligence Unit (FIU-IND), non-disclosure of investor charter and distribution waterfall, and a 10-day delay in filing its PPM audit report.
Grievance response
Delayed response to investor grievance
SEBI found that the fund took over a month to respond to an investor grievance, breaching the 30-day deadline. However, the regulator noted that the fund eventually completed its winding-up process and distributed proceeds to all investors by January 2024. Despite this, the regulator deemed the regulatory breaches as material and capable of misleading investors or disrupting regulatory oversight of AIFs.
Information
Manager accountable for non-compliances
SEBI stressed that EFAM, as manager of IAGF, is accountable for these non-compliances. It observed that Rathore, Sarkar, and Kikani were key managerial personnel who didn't comply with the code of conduct as per rules. Hence, their involvement in the alleged violations has been established.