New Delhi, AK Capital Group has settled a case with the markets regulator Sebi over allegations of indulging in unfair trade practices in the issuance of Non-convertible Debentures (NCDs).
The group agreed to pay Rs 4.3 crore towards settlement and disgorged Rs 76 lakh, along with interest of Rs 56 lakh, as per a Sebi order issued on Thursday.
The matter relates to violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms in the issuance of NCDs)
The ruling came after merchant banker A K Capital Finance Ltd (AKCFL); stock broker A K Stockmart Pvt Ltd (AKSPL); NBFC A K Capital Services Ltd (AKCSL); along with E-Ally Securities (India) Pvt Ltd (EASPL) and Ridhi Sidhi Distributors Pvt Ltd (RSDPL) –collectively referred to as AK Capital Group — filed a suo motu settlement application with Sebi.
The entities proposed to settle the alleged regulatory violations by “neither admitting nor denying the findings” under the settlement rule.
Following the payment, Sebi said that “any proceedings that may be initiated for the violations … are settled,” thereby bringing the case to a close.
The case originated from a Sebi investigation into the activities of AK Capital Group in connection with Dewan Housing Finance Ltd (DHFL).
The regulator found that DHFL, through a public issue of NCDs via a shelf prospectus and tranche I prospectus dated May 14, 2018, had raised Rs 10,944.79 crore.
During the investigation, Sebi observed that the applicants allegedly devised a scheme wherein the AK Capital Group, using the Power of Attorney (PoA), submitted bid applications for 14.08 lakh NCDs on behalf of 911 investors in the DHFL public issue.
Further, the NBFC arm of the group, A K Capital Services Ltd, provided loans to these 911 applicants at interest rates of 10.5 per cent and 11 per cent to apply for the NCDs, which carried coupon rates of 8.9 per cent and 9 per cent.
Following the allotment, AK Capital Group — again using the PoA — sold the NCDs allotted to these applicants to EASPL and RSDPL through off-market transactions. Both EASPL and RSDPL were funded by AKSPL and AKCFL, effectively making them part of the same network.
According to Sebi, the group acted together to provide a guaranteed exit at a profit to the 911 investors on the day of listing or the next day, sharing part of the commission, brokerage, and incentives earned from the issue.
As a result of these transactions, the AK Capital Group allegedly made a net gain of over Rs 26 lakh by dealing in the 14.08 lakh NCDs allotted in the DHFL issue.
As per the Sebi’s order, individually, A K Stockmart paid Rs 1.08 crore towards settlement amount, A K Capital Finance remitted Rs 96 lakh, Ridhi Sidhi Distributors (Rs 88 lakh), E-AllySecurities (Rs 86 lakh), and A K Capital Services (Rs 54.67 lakh). PTI
