JP Morgan MF settles Amtek Auto case with Sebi

JPMorgan Asset Management today settled proceedings with regulator Sebi in connection with alleged violation of mutual funds norms in the Amtek Auto case on payment of over Rs 8 crore towards settlement charges.

Sebi agreed to settle proposed adjudication proceedings in the case after it was approached by JP Morgan Asset Management India Pvt Ltd, JP Morgan MF and JP MF India Pvt Ltd with a plea under the settlement regulations "without admitting or denying the findings of fact and conclusion of law".

In a settlement order passed today, the regulator said it has disposed of the "pending enquiry and adjudication proceedings in respect of the applicants".

In a show-cause notice, it was alleged that there was a violation of the "code of conduct" and "principles of fair valuation under mutual fund norms".

In August 2015, JP Morgan MF had restricted redemptions from two of its debt schemes -- Short Term Income Fund and India Treasury Fund. The move followed a decline in NAVs (net assets value) of the schemes due to fund house's exposure to troubled auto component firm Amtek Auto's debt papers.

The decline in NAVs was triggered after a rating agency withdrew its rating on these debt instruments, after rating them quite high earlier.

The Securities and Exchange Board of India (Sebi) had initiated adjudication proceeding against the three entities. Pending adjudication proceedings, they had approached the regulator in February 2016 to settle the case on payment settlement charges.

Thereafter, Sebi's High Powered Advisory Committee recommended the case for settlement on the payment of over Rs 8.07 crore (over Rs 2.69 crore by each entity). This was also approved by the regulator's panel of whole-time members, following which it remitted the amount.

Accordingly, the regulator has disposed of the adjudication proceedings initiated against them.

It further said that enforcement actions, including restoring or initiating the proceedings, could be initiated if any representation made by them is found to be untrue.

In March 2016, Edelweiss Asset Management had announced the acquisition of global giant JP Morgan's mutual fund business in India.