Sebi fines Sure Financial institution for fraudulent sale of riskier bonds

MUMBAI: India’s market regulator on Monday fined Sure Financial institution Ltd Rs 25 crore ($3.33 million), saying it had fraudulently bought sure dangerous bonds to mom-and-pop traders with out the mandatory warnings and threat assessments.
Sure Financial institution “intentionally misrepresented” its so-called AT1 bonds as being extra engaging than mounted deposits by suppressing dangers and distorting information, manipulating prospects into investing in these dangerous belongings, the Securities and Change Board of India (Sebi) stated in an order.
AT1 bonds have quasi-equity traits and sometimes carry larger rates of interest than extra senior debt as traders threat dropping their funding if the funds are wanted to bolster a financial institution’s capital.
A revival plan for debt-laden Sure Financial institution final yr noticed its AT1 bonds absolutely written down, hurting many retail traders. Sure Financial institution had about Rs 8,800 crore ($1.2 billion) in AT1 capital as of March 2019.
There was “clear mala fide intent” on the a part of Sure Financial institution in promoting the bonds to its prospects, together with these with a low threat urge for food and people of very superior age, Sebi stated.
Sure Financial institution declined to remark.
The lender, in its submission to Sebi, stated the danger components had been communicated to traders both orally or in written paperwork.
Sure Financial institution additionally stated that there was no have to assess the danger profile of potential traders as AT1 bonds had been thought-about low threat on condition that there was no indication on the time that the financial institution would fail and the bonds must be written down.
Final yr, Sebi restricted investments in such bonds to certified institutional traders and raised their allotment and buying and selling lot sizes to Rs 1 crore.

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