To avoid Sebi action, HDFC AMC pays Rs 4 cr to settle Essel case

Impact on FMP investors from 'standstill' pact with Essel group put fund house in scrutiny

HDFC Asset Management Company (AMC) has paid Rs 4 crore to the Securities and Exchange Board of India (Sebi) to settle the case pertaining to the fund house’s exposure to Essel group companies in its fixed maturity plans (FMPs).

“The High-Powered Advisory Committee in its meeting held on March 02, 2020 considered the proposed settlement terms by the applicants and recommended the case for settlement upon payment of Rs. 4,20,46,420 towards the settlement terms,” the Sebi order read.

The MF industry had come under regulatory scrutiny over entering into standstill agreement with Essel group promoters last year.

The regulator had also sent show-cause notices to fund houses that had entered into standstill agreement even as the FMPs were maturing before the extended payment timeline given to Essel group firms.

To facilitate exits to FMP investors, HDFC AMC had later transferred Rs 500 crore worth of exposure to Essel group onto its own books.

Sebi order also pointed out that HDFC AMC had compensated unit-holders in the affected MF schemes to the tune of Rs 4.4 crore.

Following the settlement, the market regulator will not initiate enforcement action against HDFC AMC or its senior officials, which were found to be in alleged violations of various MF regulations, including those pertaining to winding up and redemption of FMP schemes at maturity date.

However, the order said that Sebi could initiate proceedings if it finds that “any representation made by the applicants in the settlement proceedings is untrue or if the applicants have breached any of the undertakings filed during the present settlement proceedings,” the order said.