Sebi imposes Rs 1 crore fine on Rana Kapoor for disclosure lapses

Mumbai: The Securities and Exchange Board of India(Sebi) has imposed a penalty of Rs 1 crore on Rana Kapoor, former MD& CEO of Yes Bank for not disclosing encumbrance on the bank’s shares.

The disclosure violation pertains to a promoter entity, Morgan Credits Private Ltd raising Rs 950 crore from Reliance Mutual Fund through unlisted Zero Coupon Non-Convertible Debentures (ZCNCDs) on April 19, 2018.

The ZCNCDs issued by Morgan Credits were backed by a personal guarantee provided by Kapoor to the extent of Rs 410 crore. Kapoor also agreed to provide, if required under circumstances shares of Yes bank upto Rs 820 crore as security for the outstanding amount.

The regulator alleged that Kapoor being a guarantor to said transaction was aware of all aspects of the transactions and it was in nature of encumbrance which is required to be disclosed under Sebi norms.

The regulator also alleged that Kapoor being a key managerial personnel had a responsibility to disclose to the board of directors any material interest in a transaction affecting the listed entity.

Sebi said Kapoor neither ensured the disclosure of the encumbrance nor informed the board of directors about his material interests in the said transaction.

“This is a case where by not disclosing the substantial material interest in the transaction to the Board of Directors of the Company, the Noticee ( Rana Kapoor)has created an opaque layer between him and stakeholders. The law does not permit any allowance to be made for such defaults as found in this case,” Sebi said in its order.

“This is not a case where the information with regard to the material events had to come from any third party to the Noticee. In fact, the Noticee was in possession of and was privy to all the material events,” it said.