Canara Robeco AMC settles the violations of MF Regulations case with SEBI by paying 84.82 lakhs

Canara Robeco Asset Management Company has paid over Rs 84.82 lakh as a settlement fee to settle alleged breaches of Mutual Fund regulations with market regulator SEBI. The matter pertained to offsite monitoring of the mutual fund from April 2020 to March 2021.

Through an order dated June 11, the Securities and Exchange Board of India (SEBI) informed that it had started adjudication proceedings against the AMC for alleged violation of mutual fund regulations.

Details of the Settlement

SEBI initiated adjudication proceedings against Canara Robeco for potentially failing to comply with regulations regarding off-site monitoring of a mutual fund scheme. Off-site monitoring ensures proper oversight of a fund’s activities even when the fund manager is not physically present at the fund house’s location. The AMC chose to settle the proceedings initiated by SEBI without admitting or denying the findings of facts.

This decision was made through a settlement order, which resulted in the disposal of the adjudication proceedings. Sebi approved the settlement upon receiving Rs 84.82 lakh from Canara Robeco. This signifies that both parties reached an agreement on the appropriate penalty amount to conclude the case. Prior to this, SEBI had also issued a show-cause notice to Canara Robeco on October 14, 2022, questioning why an inquiry should not be held or penalties imposed for the alleged regulatory violations.

SEBI’s show-cause notice listed several alleged violations, including:

• Regulation 38 of Mutual Fund Regulations: This regulation prohibits the promising of guaranteed returns to investors.
• Clause B of a SEBI circular dated December 12, 2003: This clause deals with the number of investors a scheme should have and the maximum percentage each investor can hold in the corpus of the scheme.
• Regulation 48 (2) of MF Regulations: This regulation addresses the frequency of calculation of the net asset value (NAV) and its disclosure, read in conjunction with SEBI circulars dated February 9, 2001, and March 29, 2006.
• Clause III of a SEBI circular dated October 6, 2017: This clause concerns the categorization and rationalization of mutual fund schemes.
• Clause No. 5 of a SEBI circular dated May 23, 2008: This clause involves the updating of the Key Information Memorandum and the simplification of the Offer Document of mutual fund schemes.
• Clause D of a SEBI circular dated October 22, 2018: This clause pertains to the disclosure of scheme performance.

Response of Canara Robeco

In response to the show-cause notice, Canara Robeco filed a settlement application on August 28, 2023. The company met with SEBI’s Internal Committee on December 12, 2023, and subsequently proposed revised settlement terms via an email dated December 22, 2023. After reviewing these terms, SEBI’s High Powered Advisory Committee considered the proposed settlement terms in its meeting held on March 4, 2024. The committee recommended that the case be settled upon payment of Rs 84,82,500 (Rupees Eighty Four Lakhs Eighty Two Thousand Five Hundred Only) by the AMC.

Significance of the Settlement

The acceptance of the settlement terms and the receipt of the settlement amount by SEBI led to the conclusion of the adjudication proceedings against Canara Robeco. This settlement underscores the significance of SEBI in monitoring and enforcing these regulations to protect investor interests. These regulations are implemented to maintain transparency, fair practices, and investor protection within the Indian mutual fund industry. The settlement demonstrates Sebi’s commitment to enforcing these regulations and ensuring a healthy investment environment.

Visit Lawgical Adda for more such legal updates!