The Securities and Exchange Board of India has fined Edelweiss Asset Management Ltd., Chief Executive Officer Radhika Gupta and Chief Investment Officer Trideep Bhattacharya for alleged regulatory violations.
While undertaking an industry-wide analysis of whether focused funds are true to label or not, SEBI found that Edelweiss Focused Equity Fund had violated the provision of an open-ended equity scheme investing in maximum 30 stocks in 88 days, the capital markets regulator said in a note dated Oct. 25.
The deviations from mandatory asset allocation were observed during November and December 2022, January and February 2023.
After the allotment of units, the asset management company took a long position in the NSE Nifty 50 futures for 10 days — from Aug. 2 till Aug. 11, 2022. Since the Nifty 50 has 50 constituent securities, the portfolio exposure exceeded 30 stocks, according to SEBI.
"It was also observed and alleged that purchases/sale of stocks in the scheme were timed in such a way that the deviation is not reflected in the month-end portfolio disclosure, thus, evading from reporting the deviation in monthly portfolio disclosure done in public domain," the note stated.
The scheme was found to have held 31 to 32 stocks on majority of the days, according to the regulator's note.
The fine on Edelweiss Asset Management is Rs 8 lakh, while the fine for Gupta and Bhattacharya is Rs 4 lakh each. The total payment of Rs 16 lakh needs to be made within 45 days of the issue of adjunction, according to SEBI.
On failure to pay the penalty within the timeframe, SEBI may initiate consequential actions, including but not limited to recovery proceedings under Section 28A of the SEBI Act for realisation of the fine along with interest by attachment and sale of movable and immovable properties, it said.
A settlement of Rs 19.5 lakh was done by Chief Marketing Officer Abhishek Gupta earlier this month as well.
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