In an order passed on Friday, SAT set aside the disgorgement of management fees that had been directed by Sebi, but upheld the monetary penalties levied on the fund house, its trustee entity and certain officials.
The dispute relates to a set of fixed maturity plans that matured in 2019. At the time, a portion of investor payouts had been deferred because the schemes were awaiting recovery from an underlying investment. According to the fund house, investors were subsequently paid their dues along with applicable interest within the permissible timeframe.
Sebi had earlier taken regulatory action against Kotak Mahindra Asset Management Company, Kotak Mahindra Trustee Company and some officials. The regulator had ordered disgorgement of management fees and imposed penalties in connection with the handling of the scheme payouts.
These orders were challenged before SAT.
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In its latest ruling, the tribunal granted relief to the asset manager on the issue of fee disgorgement, but did not overturn the penalties imposed by Sebi. The order effectively means the fund house will not have to return the management fees linked to the schemes in question, although the penalties remain in place.
Kotak Mahindra AMC said it respects the legal process and will study the detailed judgment once it becomes available.The tribunal has also granted the company eight weeks to pursue further legal remedies, giving it the option to challenge the decision further 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 close-ended debt mutual fund schemes that invest in instruments with maturities aligned to the scheme’s tenure. The issue of delayed repayments in some FMPs had emerged across the industry in 2019 after certain underlying debt investments faced recovery delays, prompting regulatory scrutiny.