Vijaya Bank is registered with Capital markets regulator Securities and Exchange Board of India (SEBI) as a
Vijaya Bank is registered with Capital markets regulator Securities and Exchange Board of India (SEBI) as a debenture trustee. SEBI conducted an inspection of Vijaya Bank in September 2013, during which a team from the regulator examined records and documents pertaining to various issues handled by the bank from April 2007 to March 2013.
SEBI found violation of norms related to debenture trustee. It found that the bank has violated norms that include providing of misleading information with regard to loans granted to issuer firms, non-compliance of creation of debenture redemption reserve by issuer companies in respect of all the issues, among others. Further, the bank did not comply with the listing agreement in respect of Karnataka State Financial Corporation and Canara Bank. Also, the bank did not maintain the database of issues handled and failed to maintain a proper system to track due dates of interest payment and redemption. Other violations include allotment of debentures to over 50 persons, non-dissemination of information on the website, non-issuance of press release and non-dissemination of the updated events of defaults on DT’s (Debenture Trustee) website. Investor grievances reported by the issuer companies Tata Motors and Tamil Nadu Newsprint Papers include not monitoring and no written agreement was signed between the bank and Tata Motors which also counted as a violation of debenture trustee regulations. Based on the above:
(a) Identify the corporate governance issues in the above discussion;
(b) Did any party lose money? If yes, to what extent?
(c) Given the nature of violations suggest what should be the penalty/punishment by SEBI on the Bank (on a scale of 1 to 10 wherein 1 implies written warning and 10 the other extreme).
Step by Step Answer: