Sebi fines 3 entities for flouting venture capital fund rules

Capital markets regulator Sebi on Wednesday slapped a fine of Rs 3 lakh on three entities for failing to wind up India Growth Fund, a scheme of Kotak SEAF India Fund, after completion of its tenure. The entities restrained by Sebi are — Kotak SEAF India Fund, investment manager Kotak Alternate Asset Managers Ltd and trustee of the fund Kotak Mahindra Trusteeship Services Ltd.

“…Noticees (three entities) failed to wind up the scheme upon completion of its tenure as disclosed in the original PPM (Private Placement Memorandum). The fund also extended its tenure beyond the PPM of the fund on three occasions,” Sebi said in its order.

The term of the scheme was for a period of nine years from the date of first closing March 30, 2005, extendable by one year. The fund’s tenure was supposed to end on March 30, 2014. However, it had taken four extensions which include the first extension of one year till March 30, 2015, as per the PPM of the scheme and then 3 extensions of seven years till March 30, 2022.

Sebi noted that the fund filed an online application in May 2022 stating that it wound up the scheme on March 31, 2022, and all unitholders are paid back.

However, as a registered entity, the fund, fund manager and the trustees should have complied with the provisions laid down in the VCF (Venture Capital Fund) Regulations, which the three entities have failed and this calls for a penalty, it added.

Accordingly, Sebi has imposed “a penalty of Rs 3 lakh jointly and severally on the noticees”. VCF Regulations do not provide for making any amendment of the period of operation of the fund, once the period of maturity has been fixed, including the extension of the period of maturity of the fund. In a separate order, the regulator has levied a fine of Rs 3 lakh on First Overseas Capital Ltd for violating rules governing ICDR (Issue of Capital Disclosure Requirements) and merchant bankers.

Sebi noted that First Overseas Capital Ltd, which was the lead manager for the rights issue of Sakuma Exports Ltd, submitted several details incorrectly such as information regarding country-wise and product-wise exports for FY21 and FY22 and financial details with respect to working capital requirement forming object of the issue, among others.

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