A penalty of 1.5 crore was imposed on Karvy Computershare, known as KFin Technologies, for redeeming its units in the Taurus Mutual Fund on the basis of privileged information available to it as RTA after Ballarpur Industries default.
In February 2017, by redeeming all units in the Taurus Liquid Fund and the Taurus Ultra Short Term Bond Fund, Karvy Computershare made an unlawful gain of about Rs 1.2 crore, according to Sebi.
Karvy Computershare misused its privileged position as the RTA Registrar to Issue and Share Transfer Agent of Taurus Asset Management Company.
KFin Technologies said in a statement that the company will look at the order of Sebi and decide the next course of action.
It said the order pertains to a matter of 2017 and was 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 was merged in 2018. General Atlantic is the current promoter of KFin Technologies, according to the company.
In its 56-sided prder, Sebi said that the noticee's actions in putting in its redemption application for all units on the day of default by BILT Ballarpur Industries on commercial paper repayments were based on privileged information that was not yet available to other investors. The redemption of all units caused it to make gains at the cost of other investors who could only redeem units at the post-default NAV net asset value.
The notice refers to Karvy Computershare.
The RTA dealt in units of Taurus MF by the RTA clearly helped it avoid losses and caused other investors to suffer larger losses than they would have had had the noticee redeemed units at post-default values.
After the effects of the consecutive BILT defaults on February 20 - 27, 2017 hammered down the net asset values of the affected schemes on February 22, 2017, investors had to redeem at post-default NAVs which were much lower than the NAV of the noticee on February 20, 2017, according to Sebi.
The noticee acted in violation of the provisions of the 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 came after Sebi conducted an inspection of the Taurus Mutual Fund between March 2017 and January 2018.
The probe was about the nature of valuation, due diligence conducted by the fund house in relation to its investment in debt securities issued by BILT and related entities, as well as fair treatment for investors in four of its schemes, which held debt securities issued by BILT before their markdown on February 22, 2017.