Sebi imposes Rs 2 lakh fine on Euram Bank

Markets regulator Sebi today imposed Rs 2 lakh fine on European American Bank AG (Euram Bank) as its sub-account failed to satisfy the broad-based fund criteria.

In an order, the regulator noted that India Focus Cardinal Fund (IFCF) had sought registration from Sebi as a sub-account in the broad-based fund category under the foreign Institutional investor (FII) -- Euram Bank.

IFCF was granted the registration with a condition that it will meet the broad-based criteria within 90 days.

Under the FII Regulations, the broad-based fund is categorized as a fund, established or incorporated outside India, which has at least twenty investors, with no single individual investor holding more than forty-nine percent of the shares or units of the fund.

However, if the broad-based fund has institutional investor(s), it shall not be necessary for the fund to have twenty investors and if it has an institutional investor who holds more than forty-nine percent of the shares in the fund, then the institutional investor must itself be a broad-based fund.

The regulator noted that the investors holding more than 49 percent shares in their respective share classes did not on their own meet the criteria of being a broad-based fund.

"Therefore, because of the failure of such investor having more than 49 percent to qualify as a broad-based fund, I conclude that the sub-account i.e. IFCF has, in turn, failed to satisfy the criteria of the broad-based fund," Sebi Adjudicating Officer B J Dilip said.

Euram Bank had the knowledge that IFCF had not satisfied the broad-based fund criteria when it itself held shares up to 75 percent as an individual investor in one of the share classes of IFCF, he said.

FII Regulations also envisage that a foreign institutional investor should be responsible and liable for all the acts of commission and omission of all its sub-accounts.

Noting that Euram Bank has violated FII Regulations, the Securities and Exchange Board of India (Sebi) imposed a penalty of Rs 2 lakh on it.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)