YES Bank, a private sector lender, and six persons settled the case with SEBI over alleged selective asset quality disclosure. The six people were either involved in the decision making regarding the disclosures made on 13th Feb 2019, or a member of the Reputational Risk Management Committee (RRMC). This settlement cost them ₹ 1.65 cr. Besides the bank, the six persons included Niranjan Banodkar, Ashish Agrawal, Devamalya Dey, Sanjay Nambiar, Shivanand Shettigar and Rajat Monga.
The regulator, SEBI, conducted an investigation into the affairs of YES Bank in Feb 2019. This was to ascertain the possible infringement of provisions of the SEBI Act and Prohibition of Fraudulent and Unfair Trade Practices (PFUTP). As a result of this investigation, SEBI observed that the bank and six persons committed certain violations and hence, issued show cause notice (SCN) to them in Oct 2020.
The SCN showed that it was alleged that YES Bank made a selective disclosure on 13th Feb 2019, highlighting “nil” divergence, which created a positive impact on the price movement. Furthermore, they did not disclose additional vulnerabilities raised by the RBI in the Risk Assessment Report (RAR) such as lapses and regulatory violations in several areas of their operations.
This announcement mislead the investors that resulted in an increased price of the scrip by around 30% and the volume of scrip trading also increased the next trading day. But the applicants proposed a settlement of the proceedings initiated against them. Hence, SEBI’s committee suggested that the settlement of the case may be done upon payment of Rs. 1.65 cr by applicants on joint and several liabilities basis. And finally, SEBI settled the case.