January 13, 2020

Yes Bank Ex-Audit Head For SEBI Probe Into Insider Trading

[ By Bobby Anthony ]


Former head of the audit committee of Yes Bank’s board Uttam Prakash Agarwal has filed a complaint before the Securities and Exchange Board of India (SEBI) seeking a probe into alleged insider trading.

Agarwal has alleged “illegal gains made by a certain set of people” by giving misleading information to stock markets about potential investors, including Citax and Erwin Singh Braich.

Agarwal, who is also a former president of the Institute of Chartered Accountants of India (ICAI), has revealed, in a letter to SEBI Chairman Ajay Tyagi and Wholetime Member G Mahalingam, the chain of events, when Yes Bank was evaluating potential investors.

He has also marked a copy of the letter to Reserve Bank of India (RBI) Governor Shaktikanta Das, Secretary of the Ministry of Corporate Affairs Injeti Srinivas, National Stock Exchange (NSE) Managing Director and CEO Vikram Limaye, besides Bombay Stock Exchange (BSE) Managing Director and CEO Ashish Chauhan.

The NSE has also acknowledged the receipt of the letter.

Agarwal has asked the SEBI to investigate whether the process followed by Yes Bank Managing Director and CEO Ravneet Gill is in compliance with the law.

He has sought a probe into whether information provided to Yes Bank’s board, as well as disseminated to the public through a press release, and to stock exchanges, besides the RBI was “false or misleading or distorted”.

Agarwal has also questioned if the whole process influenced decision of investors on account of dissemination of false and misleading news, which may have enthused sale or purchase of securities.

Even more serious is Agarwal’s demand for a probe into “the resultant illegal gains made by a set of people on account of non-compliances, false or misleading news,” and for fixing responsibility with appropriate fines, punishment as well as other measures.

According to Agarwal’s compliant, in the beginning, the Yes Bank management didn't share names of potential investors with board members and when it finally did, in the form of Citax and Braich, these were not binding term sheets devoid of details and without any due diligence from legal experts or investment banks.

However, after facing pressure from Yes Bank board members, Agarwal alleged that Managing Director and CEO Ravneet Gill downloaded from the internet, a copy of Citax’s balance sheet with paid-up capital of only 100 pounds.

This led to Yes Bank board members insisting that no such misleading information about investors putting in billions of dollars should be shared with the public or regulatory authorities.

“In addition to two term sheets, the MD & CEO tabled three more single-page letters from different investors, namely Rekha Jhunjunwala (undated), Ward and Ferry and Discovery Capital. They were Expressions of Interest (EoIs) and not commitments,” Agarwal alleged.

On the basis of a letter issued by Prime Securities (previously banned by SEBI), stating that it will find out interest of investors in the UK was a clear ploy by the MD & CEO to salvage commitments made to the board and given to the public, Agarwal alleged.

In view of the management's failure to oversee the raising of capital, the “board set up an empowered committee to suggest alternative and corrective ways to deal with the situation, which was caused by inefficiencies and failure on the part of the M& CEO,” Agarwal alleged.

Agarwal stated that he had suggested a forensic audit to investigate dissemination of misleading information, but no such action was taken.

IDFC Securities, Ambit Capital and Avendus made presentations to the empowered committee of Yes Bank’s board and agreed about the concerns expressed. Regulators should bar any board meetings on capital until legitimate and investors are presented, they said.

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