Sebi fines principal PNB in blank redemption form cases

Regulator imposed penalty of Rs 10 lakh each on company, principal trustee company for violations

The Securities and Exchange Board of India penalized Principal Pnb Asset Management Company and Principal Trustee Company for bending its rules in favour of a large investor. 

 

The asset manager offered the investor an unfair advantage over others through the issue of a blank redemption forms with a time stamp already on it, allowing it to redeem its investment at a gain. This is said to have happened at least twice. 

 

The regulator imposed a penalty of Rs.10 lakh each on Principal Pnb Asset Management Company and Principal Trustee Company for the violations. 

 

The investor, Lok Prakashan, invested Rs.15 crore in Principal Monthly Income Plan (MIP) on December 15, 2007, and, on November 03, 2008, they are said to have received a letter from the asset manager informing that since their investment was 25% of the funds total assets of the scheme, they would be forced to redeem a portion of their investments under SEBI’s guidelines. 

 

It was alleged that in order to compensate for the losses made by the investor, the Principal entities provided blank time stamped redemption forms to the investor, wherein, they could exit the fund on a high and re-enter when it was lower.