Market regulator Securities and Exchange Board of India (SEBI) has decided to keep unchanged its Rs5 lakh penalty imposed on Sasidhar V, former head of customer service at Taurus Mutual Fund (TMF), for tampering with the date and time stamping machine (DTSM) at Taurus Asset Management Co (AMC) Ltd. SEBI was hearing the case afresh as per directions from the securities appellate tribunal (SAT).
In an order on 27 June 2023, Ananta Barua, whole-time member (WTM) of SEBI, says, "I find that the noticee (Mr Sasidhar) was involved in the DTSM, which resulted into an undue benefit to certain investors in the four schemes of TMF by redeeming their units at higher net asset value (NAV). Thus, I find that the noticee has violated the provisions of Regulations 3(a) and 4(1) of prohibition of fraudulent and unfair trade practices relating to securities market (PFUTP) regulations, 2003."
In its show-cause notice, SEBI alleged that the anomaly observed in the DTSM between 17 February 2017 and 20 February 2017 was not because of error or malfunction, but because tampering was done in the DTSM by TMF. "The key of the machine and the password to alter the time and date were known to Mr Sasidhar. He was in possession of the key and password of DTSM and acted fraudulently by tampering with the DTSM."
"This was done with an objective to give favour to a select few investors, i.e. Madhvi Mukund Sagade, Priya Jude Abraham, Jude J Abraham and Joseph Abraham, on 17 February 2017 and Sukanta Dey and Punjab and Sind Bank on 20 February 2017," the SCN says.
SEBI noted that these investors whom Mr Sasidhar favoured were holding units of Taurus liquid fund, Taurus dynamic income fund, Taurus ultra short-term bond fund and Taurus short-term income fund. These four debt schemes had exposure in debt securities issued by Ballarpur Industries Ltd (BILT).
On 20 February 2017, 22 February 2017 and 27 February 2017, BILT defaulted on its payment obligation of Rs45 crore, Rs39.75 crore and Rs22.25 crore, respectively, to TMF.
SEBI says the default in the securities issued by BILT was known to TMF on 20 February 2017. However, it was recognised, and its impact on NAV (net asset value) of the four schemes, which had invested in these securities, was reflected and the marked-down NAV was published on 22 February 2017.
Consequently, the AMC marked down the value of BILT securities to zero and decided to suspend subscriptions in the four schemes from 23 February 2017.
"It is also clear that due to the change in serial numbers of the redemption requests of these investors of the four schemes, they were able to redeem their units in the four schemes at a higher NAV prior to mark down in the value of securities of BILT due to default in payment obligation," SEBI says.
During its inspection, SEBI found that Mr Sasidhar was in possession of the password of DTSM with which he would have changed the time stamping of the various requests received by Taurus MF to ensure certain investors get a higher NAV, i.e., the NAV before the mark down of BILT securities.
After examining the replies of TMF and DTSM vendor Solaris Computers Pvt Ltd, SEBI in the SCN alleged that such an anomaly is attributable to tampering in DTSM by TMF through Mr Sasidhar.
Earlier in August 2020, SEBI had imposed the same Rs5 lakh penalty on Mr Sasidhar in this case. Mr Sasidhar challenged this order before SAT. In its order on 1 July 2022, SAT remitted the case to the SEBI WTM for a fresh hearing after providing a copy of the investigation report and giving an opportunity to Mr Sasidhar to file a reply.
