Sebi slaps Rs 1.5 cr fine on Karvy Computershare in Taurus Mutual Fund case

Sebi on Wednesday imposed a penalty of Rs 1.5 crore on Karvy Computershare (presently known as KFin Technologies) for redeeming its units in Taurus Mutual Fund on the basis of privileged information, pertaining to Ballarpur Industries default, available to it as RTA.

By redeeming all units in Taurus Liquid Fund and Taurus Ultra Short Term Bond Fund in February 2017, Karvy Computershare made unlawful gain of about Rs 1.2 crore, Sebi said in an order.

Karvy Computershare misused its privileged position as RTA (Registrar to Issue and Share Transfer Agent) of Taurus Asset Management Company.

In a statement, KFin Technologies said the company will examine the order of Sebi and decide the further course of action.

It further said the order pertains to a matter of 2017 and related to Karvy Computershare Private Limited (KCPL) when it was part of the erstwhile promoter group and management.

KFin Technologies is the successor entity where KCPL got merged in 2018. The present promoter of KFin Technologies is General Atlantic, the company added.

In its 56-page prder, Sebi said "the actions of the noticee in putting in its redemption application for all units on the day of default by BILT (Ballarpur Industries) on commercial paper repayments were carried out based on privileged information garnered in its capacity as RTA, information which was not yet available to other investors".

"The redemption of all units by the noticee clearly caused it to make gains at the cost of other investors who could only redeem units at the post-default NAV (net asset value)," it added.

The noticee refers to Karvy Computershare.

The dealing in units of Taurus MF by the RTA clearly helped it avoid losses and which induced other investors to suffer losses larger than they would have had the noticee redeemed units at post-default values.

After the cascading effects of the consecutive BILT defaults during February 20-27, 2017 hammered down the net asset values of the affected schemes on February 22, 2017, several investors had to redeem at post-default NAVs which were much lower than the NAV availed by the noticee on February 20, 2017, Sebi noted.

Through such activities, the noticee violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules and the code of conduct specified under Sebi's (Registrars to Issue and Share Transfer Agents) Regulations or RTI and STA norms.

The order comes after Sebi had conducted an inspection of Taurus Mutual Fund between March 2017 and January 2018.

The probe was for examining the nature of valuation, due diligence conducted by the fund house in respect of its investment in debt securities issued by BILT and related entities as well as fair treatment to investors in four of its schemes, which held debt securities issued by BILT before their markdown in valuation on February 22, 2017.