SEBI on Wednesday imposed a penalty of ₹2 crore on former YES Bank MD Rana Kapoor for mis-selling of the bank AT-1 (additional tier-I) bonds to retail investors between 2016 and 2019.

The regulator has asked Kapoor to pay the fine within 45 days, as per a notice on SEBI’s web site.

“Considering the large number of investors impacted and the quantum of sales achieved through this scheme, I am of the opinion that this act of Noticee deserves penalty commensurate with the severity of violation and would be a deterrent,” the adjudicating officer said in the SEBI notice.

Investor complaints

SEBI said that it had received complaints from several investors after which it launched an investigation, wherein it found that Kapoor has pushed for the sale of such instruments.

Further, during the process of reselling the AT-1 bonds from institutional to individual investors, the latter were not informed about all the risks involved in subscribing to such bonds.

It also said that in his submission, Kapoor “tried to downplay the risk elements” associated with the AT-1 bonds and stated that such bonds are low risk. He also contended that the risk associated with AT-1 Bonds is no different from other debt instruments.

In March 2020, a consortium of investors led by State Bank of India infused ₹10,000 crore in the private sector lender under the YES Bank Reconstruction Scheme 2020. As part of the scheme, AT-1 bonds of YES Bank worth ₹8,415 crore were written-off leaving bond-holders empty-handed.

AT-1 bonds are perpetual in nature, and are subordinate to depositors, general creditors and subordinated debt of the bank. After the near-collapse of YES Bank, AT-1 bond holders claimed that they were mis-sold these bonds, presented as ‘super FDs’ by the bank’s executives.

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