Mumbai/IBNS: The Securities and Exchange Board of India (SEBI) the regulatory body for securities and commodity market in the country has imposed a five-year ban on industrialist and Reliance Groups managing director (MD) Anil Ambani and 24 other parties, including former senior executives of Reliance Home Finance, from participating in the securities market.
According to reports, the SEBIs action is a result of their involvement in the misdirection of company funds.
SEBI has also imposed a hefty penalty of Rs 25 crore on Anil Ambani and restrained him from being associated with the securities market including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with the market regulator, for a period of five years, reports Economic Times.
The market regulator has identified a significant financial fraud involving Reliance Home Finance Ltd (RHFL).
Led by Anil Ambani and other key figures, the scheme involved siphoning off substantial funds from the company through dubious loan disbursements, resulting in severe losses for shareholders, according to a report by Mint.
SEBI observed that during FY18 and FY19, RHFL sanctioned and distributed substantial Guaranteed Payment Credit (GPC) loans totaling thousands of crores, and these loans were issued to entities with severely compromised financial health, including negative net worth and minimal assets.
Alarmingly, these loans were granted without any recorded collateral or security, reports Mint.
The management of RHFL repeatedly deviated from standard credit due diligence.
Despite glaring financial weaknesses of the borrowers, internal credit ratings were ignored, and the requirement to assess the probability of default was waived.
This lack of scrutiny allowed risky loans to proceed unchecked, Mint reported.
Earlier on February 11, 2019, the board of RHFL explicitly instructed the cessation of GPC loan disbursements.
The company, however, continued to issue these loans, including those sanctioned by Anil Ambani in his capacity as group head, and this disregard for board directives highlights the severity of the internal control failures, according to a report by Mint.
Besides imposing a fine of Rs 25 crore on Anil Ambani, the Indian market regulator has also imposed Rs 27 crore on Amit Bapna, Rs 26 crore on Ravindra Sudhalkar, and Rs 21 crore on Pinkesh Shah, while several entities linked to the fraudulent scheme have been fined Rs 25 crore each.
These fines are a response to their roles in facilitating or benefiting from illegal loan disbursements, as per reports.
As Chairman of the ADA Group and a significant promoter of RHFLs holding company, Anil Ambani played a crucial role in orchestrating the fraudulent loans, and his influence extended to approving substantial loan amounts and directing funds to related entities, according to SEBI.
