Another blow on Sahara

AMC portfolio management licence cancelled, Sebi says company and promoters don't meet 'fit and proper' norm

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Market regulator Securities and Exchange Board of India (Sebi) on Friday cancelled Sahara Asset Management Company’s portfolio management licence.

It said the AMC had failed to meet the 'fit and proper' criterion and has has rejected Sahara’s request for renewal of its licence, pending since July 2012.

Sebi has directed Sahara AMC to transfer its business to another registered AMC or allow investors to redeem their money.

Sahara AMC is part of the Subrata Roy-led Sahara group, undergoing a legal battle with Sebi over bond issuance worth more than Rs 20,000 crore. The case has been before the Supreme Court for quite a while and the judges have rapped the group regularly. One outcome has been that Roy has been in jail for several months; the judges have refused to let him out on bail till his companies put up a certain basic minimum in bank guarantees.

The Sebi order refers to all this. It has said Sahara AMC as an entity was not a 'fit and proper' entity for a renewal of its certificate, given the current proceedings against the directors of the AMC's promoters -- Sahara India Financial Corporation (SIFCL), Sahara India Corp Investments, Sahara Prime City and Sahara Care. SIFCL has 46 per cent stake in Sahara AMC, while Subrata Roy has nearly 80 per cent stake in SIFCL.

“..while considering any application for grant of registration as any intermediary, the applicant has to pass the test of being a ‘fit and proper person’... it is necessary to apply the eligibility criteria on the applicant entity, as well as the persons who hold responsible positions in the body corporate or are in a position to influence the decision making process,” Sebi said in the order.

In its defence, Sahara AMC had in July 2014 written to Sebi, “Sahara AMC has been diligently and in a bona fide manner, managing all its clients’ investments as per the provisions of the Portfolio Managers Regulations since 2006 and there have been no deficiencies/investor complaints with regard to its portfolio management operations. There are no regulatory actions/proceedings pending against Sahara AMC and/or its key management person.”

The Sebi order further stated, “Subrata Roy Sahara, a substantial shareholder in SIFCL, is in an important position to exercise control and influence over the activities of that company. Such substantial controlling interest interest entailing significant influence will also extend to Sahara AMC, since SIFCL is one of the major promoters of Sahara AMC.”

Sebi said that as a regulator it has to take into consideration important facts such as prosecution proceedings and detention orders pending against the persons ultimately controlling Sahara AMC, while considering its eligibility as a portfolio manager.

“Keeping Sahara AMC in the mainstream market after considering the antecedents of Subrata Roy Sahara and some other companies of the Sahara group may cause prejudice to the interests of investors and the safety and integrity of the securities market. I am, therefore, of the firm opinion that the applicant is not a ‘fit and proper person’ to act as a portfolio manager in the Indian securities market,” said S Raman, wholetime member of Sebi, in his order.

MORE RAPS

• Sebi rejects Sahara AMC’s licence renewal request as portfolio manager
   
• Considers Sahara AMC not a ‘fit and proper’ entity
   
• The registration certificate will stand cancelled in 30 days
   
• Regulator directs Sahara AMC to either transfer biz to another Sebi-registered portfolio manager or allow investors to withdraw funds