On Friday, markets regulator SEBI imposed a penalty of Rs. 1 crore on Rana Kapoor. According to reports, SEBI imposed the penalty on the former MD and CEO of YES Bank for failing to make proper disclosures about Morgan Credit’s transaction.
According to SEBI, the YES Bank founder created an opacity between him and the stakeholders by not reporting the details of the transaction to the board of directors at YES Bank. Morgan Credits, which used to be an unlisted promoter entity of YES Bank, raised a total amount of Rs. 950 crore from Reliance Mutual Fund through various unlisted Zero-Coupon Non-Convertible Debentures back in April 2018.
According to SEBI, Kapoor entered into an agreement with Morgan and Milestone Trusteeship Services via a Trust Deed. Kapoor also made himself a guarantor of the agreement. By the virtue of being the guarantor in the agreement, the former CEO has provided a personal guarantee for the obligations of Morgan to the extent of Rs. 410 crore. Apparently, he has also provided his shares in the company as a security for the outstanding amounts, which amount to Rs. 820 crore.
According to the regulator, Kapoor intentionally hid the information about him being a guarantor to the transaction from the board of directors at YES Bank. The regulator also noted that the same had adversely impacted the lender in terms of market capitalisation.
In addition to that, Kapoor has also failed to disclose his material interests in the transaction to the board of directors at YES Bank, SEBI noted.
“The transaction carried out by the noticee via Trust Deed dated November 14, 2018, by way of providing ‘personal guarantee’ for the obligations of the Morgan issued ZCNCDs was an event involving substantial material interest and was having a direct bearing on the company,” the regulator said.
By failing to disclose these crucial details to the board of directors of the company, Rana Kapoor has blatantly violated the provisions listed under the Listing Obligations and Disclosure Requirements Regulation.
Furthermore, Kapoor has also failed to maintain the expected operational transparency towards the company and stakeholder, SEBI noted. Thus, the regulator imposed a consolidated monetary penalty of Rs. 1 crore on Rana Kapoor, for violating the provisions under the LODR Regulations.