India bans Kotak from launching certain bond funds for six months


Band Abhirup Roy

MUMBAI, August 27 (Reuters)India’s market regulator on Friday banned Kotak Mahindra Asset Management, one of the country’s largest mutual fund managers, from launching fixed-maturity plans (FMP) for six months and fined it for breaking the rules and harming the interests of investors.

FMPs, a popular investment option in India, are fixed income funds that invest in debt securities with maturities similar to the term of the fund. Data from Value Research, a fund tracking website, showed Kotak had around 70 billion rupees ($ 949 million) in FMP assets on Friday.

The Securities and Exchange Board of India (SEBI) had been investigating Kotak since 2019 for placing FMP investor funds in debt securities of certain distressed companies, and later for failing to pay investors in full. on the basis of the unit values ​​of these funds.

The fund company did not exercise due diligence in the investment and did not disclose adverse information to its unitholders, SEBI said in its 84-page order, adding that “the audacity and Kotak’s lack of due diligence “had hurt investors.

Kotak did not immediately respond to a request for comment.

SEBI also ordered the fund manager to reimburse part of the investment management and advisory fees it collected from unitholders of certain affected schemes and imposed a penalty of 5 million rupees ($ 67,902) .

The order comes as SEBI is monitoring fund managers more strictly for breaches of rules or action against investor interests.

In June, he banned Franklin Templeton in India from launching new debt programs for two years after discovering “serious defaults and breaches” in the company when it decided to suddenly shut down several programs.

Franklin appealed the decision, but agreed that he would not be launching new debt funds at this time.

(Reporting by Abhirup Roy; Editing by Aditya Kalra and David Holmes)

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