The Supreme Court on Monday upheld the Securities and Exchange Board of India's (SEBI) findings and penalties against Kotak Mahindra Asset Management Company (Kotak AMC), its Managing Director Nilesh Shah and other senior officials in the Essel Group fixed maturity plan (FMP) case.
Dismissing appeals filed by Kotak AMC, Kotak Trustee and six senior executives, the apex court upheld SEBI's findings that the fund house had failed to exercise due diligence, extended the maturity of debt securities beyond the tenure of the schemes without following regulations, and did not make timely disclosures to investors and the regulator.
The court also imposed litigation costs of ₹30 lakh on Kotak AMC and ₹20 lakh on Kotak Trustee, in addition to upholding the monetary penalties earlier imposed by SEBI.
"The 1996 Regulations make no distinction between a breach resulting in profit and a violation resulting in loss. Neither do we," the court said. "Market integrity being the paramount consideration, profit or loss to investors is immaterial to determine whether a regulatory infraction has occurred.”
A Bench of Justices Dipankar Datta and Satish Chandra Sharma concluded with a warning to the industry: "Mandate first, gains later; SEBI compliance, never falter."
