The Hindu Business Line : SAT slashes SEBI fine on JM Financial

THE Securities Appellate Tribunal (SAT) has slashed the fine on J.M. Financial Asset Management Company to Rs 5 lakh, from SEBI's earlier penalty of Rs 50 lakh.

J.M. Financial AMC had appealed a SEBI adjudication officer's order asking the company to pay a penalty of Rs 50 lakh for not disclosing its promoters' fine liability of Rs 1 lakh while filing offer documents for some mutual fund schemes.

The Tribunal has viewed the lack of disclosure as a technical omission and slapped a token fine, taking into account the AMC's ability to pay, according to sources.

The adjudicating officer of the Securities and Exchange Board of India (SEBI) had slapped fines of Rs 20 lakh on J.M.'s mutual funds and Rs 30 lakh on the AMC for the omission. J.M. Financial Group had subsequently appealed against this order to the SAT.

J.M. Financial Group had purchased 6,400 shares of J.M. Shares and Stocks Brokers Ltd for a value of Rs 60,000. This transaction was not informed to the stock exchanges on time and it was viewed as a violation of the takeover code.

SEBI had fined J.M. Financial Group for a sum of Rs 1.8 lakh for this violation. Subsequently, the SAT had reduced this fine to Rs 1 lakh.

J.M. Financial Asset Management Company (earlier known as J.M. Capital Management Private Ltd) had filed with SEBI its offer documents for floating five schemes, of which, two were finally launched. The offer document of these schemes did not mention that the promoters of the company had a fine liability of Rs 1 lakh.

The SEBI's adjudicating officer had taken a view of this case and fined the company Rs 50 lakh for launching two schemes - J.M. High liquidity Fund and J.M. Basic Fund - whose offer documents did not carry this disclosure.

According to sources, in its appeal to the SAT, J.M. Financial AMC said that the information about the violation and the subsequent fine were not conveyed to the mutual fund and that is the reason for the non-disclosure of this information in the offer document.

The SAT took grim view of SEBI's exorbitant fine and decided that 1/10th of the original fine of Rs 50 lakh would be the appropriate punishment.

The detailed order is expected on Tuesday.

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