AT-1 bond mis-selling case: SAT gives interim relief to YES Bank

In April, Sebi had slapped a penalty of Rs 25 crore on it and 3 executives

YES Bank has obtained an interim stay on the Securities and Exchange Board of India's (Sebi's) order dated April 12 which imposed a penalty of Rs 25 crore for alleged mis-selling of additional tier-1 (AT-1) bonds.

“We stayed the effect and operation of the impugned order against the appellants provided the appellant bank, namely, YES Bank gives an undertaking on behalf of the bank, as well as on behalf of the other appellants who were members of the private wealth management team to the effect that in the event of failure of the appeal, the bank would pay the penalty amount within two weeks from the date of the order,” the Securities Appellate Tribunal (SAT) said in an order.

The SAT is a quasi-judicial body that hears appeals filed by parties aggrieved by orders passed by Sebi, the Insurance Regulatory and Development Authority of India (Irdai), and the Pension Fund Regulatory and Development Authority (PFRDA).

In April, Sebi imposed a penalty of Rs 25 crore on YES bank and three of its senior executives in the private wealth management team for allegedly perpetrating fraud on its customers by pitching AT-1 bonds as fixed deposits (FDs). 

The SAT observed the relationship managers have not been booked by Sebi. “Prima facie, the question as to whether the buyers were informed of the risk factor with regard to the AT-1 bonds can be best explained by the relationship managers who were part of the investigation but were not the noticees in these proceedings,” it said.

On the allegation of the risk factors not being properly told to investors, the tribunal observed that they were put up “on the website and it was in the knowledge of everyone.”

The SAT also observed that YES Bank was under a rehabilitation scheme and a lot of capital has been infused into the bank for its revival.

The tribunal has directed Sebi to file a reply within four weeks. Following which YES Bank will get three weeks to file a rejoinder. The SAT will take up the matter for final disposal on July 30.