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Capital market regulator Securities and Exchange Board of India (SEBI) has disposed of charges against L&T Mutual Fund and its former officials on violation of norms during inter-scheme transfers between April, 2017 and June, 2018.
The case has now been closed after the fund house and the former officials applied for settling the case with SEBI by paying ₹1.15 crore.
The ex-officials each paid ₹14.6 lakh and the fund house paid ₹57 lakh as part of the settlement proceedings.
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After an investigation, SEBI issued show-cause notice on L&T MF, Kailash Kulkarni (ex-chief executive officer), Shriram Ramanathan (former head of fixed income) besides former portfolio managers -fixed income Vikas Garg and Jalpan Shah as to why an inquiry should not be held against them for alleged violations.
SEBI observed that the fund house failed to ensure that the transfer of securities from one scheme to another be allowed only if such transfers are done at the prevailing market price. And that “the securities so transferred are in conformity with the investment objective of the scheme.”
Further, the investigation observed that the fund house failed to ensure that the valuation of investments should be based on the principles of fair valuation reflecting the realisable value of the assets and through appropriate valuation policies. The entire procedure should be approved by the Board of asset management company to ensure that there is no conflict of interest besides a procedure to detect and prevent incorrect valuation.
“Pending the adjudication proceedings, the applicants proposed to settle the instant proceedings initiated against them, without admitting or denying the findings of fact and conclusions of law, and filed settlement applications with SEBI,” said the regulator order.
Interestingly, the settlement of case come after L&T MF sold its business to HSBC MF.
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Kulkarni is co-CEO of HSBC MF while Ramanathan is the chief investment officer of fixed income. Shah is a fixed-income fund manager at HSBC MF. Garg is now head of fixed income at Invesco MF.
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