Market regulator Sebi directs Embassy Reit to suspend CEO Aravind Maiya

Action after NFRA debarred Maiya for 10 years in a probe related to Coffee Day

The Securities and Exchange Board of India (Sebi) on Monday directed  Embassy Office Parks Management Services, manager to the Embassy Real Estate Investment Trust (Reit), to suspend its chief executive officer Aravind Maiya for lapses in the “fit and proper” criteria.

 

The market regulator has directed the company to appoint an interim CEO with immediate effect.

 

Sebi’s action follows the debarment of Maiya by the National Financial Reporting Authority (NFRA) for ten years and the slapping a penalty of Rs 50 lakh for “professional misconduct” in the audit of Coffee Day Enterprises which allegedly led to the concealment of a “large fraud”. NFRA issued the order on August 19.

 

 

Embassy REIT was listed on the bourses in 2019 and manages nearly Rs 40,000 crore of unit holders’ money. Maiya was appointed as the CEO of the Reit’s manager in July 2023.

 

Sebi noted that the manager of Embassy REIT failed to take any remedial action in complying with the “fit and proper criteria” of Maiya and showed “strong reluctance” in doing the same.

 

On assessment of the fit and proper criteria, the intermediary was required to replace the CEO within 30 days of the disqualification.

 

“Sebi is well within its mandate to ensure that Mr Aravind Maiya serves out his debarment due to professional misconduct, instead of making a mockery of it by taking on other ostensibly unconnected leadership roles which require even greater professional competence and integrity in the financial field,” noted Sebi whole-time member Ashwani Bhatia in the interim order.

 

In its order, NFRA had found gross negligence, failure in due diligence, and failure to disclose misstatements known to him during the audit of Coffee Day. In an earlier order on Coffee Day, Sebi had noted that Rs 3,535 crore was transferred from the accounts of Coffee Day to its subsidiaries and related parties without obtaining necessary approvals.

 

“It cannot be the case that an entity declared persona non grata by NFRA is able to claim diplomatic immunity from Sebi. Doing so would erode the credibility of regulation,” notes the Sebi order.

 

The market regulator’s action on a Reit comes at a time when the Congress and US-based short-seller Hindenburg Research have questioned its intent for regulations around the development of Reits ecosystem.