Kotak grants partial relief to AMC in SEBI case on SAT fixed maturity plan payout

The Securities Appellate Tribunal (SAT) has granted partial relief to Kotak Mahindra Asset Management Company in a case related to delayed payments in certain Fixed Maturity Plans (FMPs), while upholding the penalty imposed earlier by the capital markets regulator.

In an order passed on Friday, the SAT set aside the management fee waiver directed by SEBI, but upheld the monetary penalty imposed on the fund house, its trustee entities and certain officers.

The dispute relates to a set of fixed maturity schemes maturing in 2019. At that time, a portion of investor payments were deferred as the schemes awaited recovery from the underlying investment. According to the fund house, the investors were repaid their dues with applicable interest within the permissible time frame.

Sebi had earlier taken regulatory action against Kotak Mahindra Asset Management Company, Kotak Mahindra Trustee Company and some officials. The regulator ordered the disbandment of management fees and imposed penalties in connection with the management of scheme payouts.

These orders were challenged before the SAT.

In its latest judgment, the tribunal granted relief to the asset manager on the issue of fee disgorgement, but did not quash the penalty imposed by SEBI. The order effectively means that the fund house will not have to refund the management fees attached to the schemes in question, although the penalty remains in place.

Kotak Mahindra AMC said it respects the legal process and will study the judgment in detail once it is available.

The tribunal also gave the company eight weeks to pursue further legal remedies, giving it the option to further challenge the decision if it chooses to do so.

Kotak Mahindra AMC added that the case has no impact on its existing schemes or unit holders, and reiterated its commitment to regulatory compliance and investor protection.

Fixed Maturity Plans are closed-ended debt mutual fund schemes that invest in instruments with maturities commensurate with the tenure of the scheme. The issue of delayed payments in some FMPs emerged across the industry in 2019 as certain underlying debt investments faced delays in recovery, prompting regulatory scrutiny.