Sebi fines IAGF, trustee and managers ₹29 lakh for AIF rule breaches

Capital markets regulator Sebi has imposed penalties totalling Rs 29 lakh on six entities, including India Asset Growth Fund, its manager Essel Finance Advisors and Managers, and trustee Vistra ITCL (India) for multiple violations of AIF rules.

The regulator levied a fine of Rs 11 lakh on IAGF, Rs 10 lakh on Arpan Sarkar and Jaykishan Kikani (jointly and severally), Rs 6 lakh on Vistra ITCL (India), and Rs 2 lakh on Essel Finance Advisors and Managers (EFAM), its Chief Executive Officer Vishnu Prakash Rathore (jointly and severally).

The regulator, in a 39-page order, found the entities guilty of serious lapses in regulatory compliance during the inspection period from April 2021 to March 2022, Sebi said in the order on Friday.

The markets watchdog observed that India Asset Growth Fund (IAGF) failed to disclose disciplinary actions and litigation history of its sponsor, manager, trustee, and key officials in its placement memorandum (PPM), as mandated under the norms.

Later, the fund submitted a revised PPM containing such disclosures during a change of control application, which was neither approved nor circulated to investors, resulting in a breach of the disclosure framework of the code of conduct of the alternative investment fund (AIF) regulations.

Sebi also pulled up the fund for providing valuations based on underlying assets instead of the securities it held, as well as for delayed registration with the Financial Intelligence Unit (FIU-IND), non-disclosure of the investor charter and distribution waterfall, and a 10-day delay in filing its PPM audit report.

The regulator found that the fund took over a month to respond to an investor grievance, breaching the 30-day deadline. It noted that although the fund eventually completed the winding-up process and distributed proceeds to all investors by January 2024, the regulatory breaches were material.

The regulator concluded that the violations had the potential to mislead investors, and disrupt regulatory oversight of AIFs.

Sebi highlighted that EFAM being manager of IAGF is responsible for such non-compliances. It noted that Rathore, Sarkar and Kikani were the key managerial personnel who failed to abide by the code of conduct as per the rules. Therefore, the allegations against them stand established.