SEBI probes investments between Nippon mutual fund and YES Bank

Market regulator SEBI is investigating investments between country’s largest foreign-owned fund Nippon India Mutual Fund and Yes Bank between 2016 and 2019 for “suspected misuse of investors’ money,” news agency Reuters reported on January 19 citing sources.

At the time, the parent company of the mutual fund was owned by the Anil Dhirubhai Ambani Group. Yes Bank was taken over by the central bank in 2020 and sold to a consortium of banks after a dramatic rise in toxic assets.

According to the Reuters report, the Securities and Exchange Board of India (SEBI) is probing whether investments by the fund, known at the time as Reliance Mutual Fund, in perpetual bonds of Yes Bank were made as part of a deal whereby in return the lender invested in securities of Anil Ambani group companies. The sources declined to be named as the investigation is confidential, it added.

SEBI’s regulations say that the parent of a mutual fund cannot access investors’ money either directly or indirectly.

Sources also told Reuters that if the regulator’s probe results in charges against the fund, its officials or the bank, it could lead to penalties ranging from restrictions on accessing capital markets to monetary penalties. The current owner of the fund, Nippon India, as well as the previous owner could be liable.