Capital markets regulator Securities and Exchange Board of India (SEBI) has refused to renew the fund management license held by Sahara Asset Management Company Pvt Ltd (Sahara AMC), it said on Friday.
Sahara AMC, which runs mutual fund schemes, did not comply with its 'fit and proper norms' for renewal of portfolio manager's license, SEBI said.
Financial companies must meet the regulators' "fit and proper" criteria mentioned in Schedule II of the SEBI (Intermediaries) Regulations, 2008 to operate in India.
The company was granted a certificate of registration as portfolio manager for three years by SEBI from Oct 16, 2006 to Oct 15, 2009. Thereafter, Sahara AMC had given a renewal of the license for the next three years till Oct 15, 2012. It had again applied for the renewal of the license on July 6, 2012.
On July 11, 2012. SEBI informed the company that it was not a 'fit and proper person' eligible for renewal, and should give the reasons why its application not to be rejected.
Sahara replied to the letter on July 28, 2014, saying, SEBI should not consider the criteria in relation to promoters of Sahara AMC for determining the renewal. The company has been managing all its clients' investments well as per the provisions and there has been no complain from investors or deficiencies with regards to its portfolio management operations.
SEBI, in its reply to Sahara said, that the AMC was directed to submit details pertaining to the shareholding of its promoter companies. However, the information has not been provided by Sahara AMC.
“Keeping Sahara AMC in the mainstream market after considering the antecedents of Subrata Roy Sahara and some other companies of the Sahara group, may cause prejudice to the interests of investors and the safety and integrity of the securities market. I am, therefore, of the firm opinion that the applicant is not a ‘fit and proper person’ to act as a portfolio manager in the Indian securities market,” stated SEBI.
As a result of that, the certificate of registration granted to Sahara AMC as a portfolio manager shall stand cancelled after thirty days from the date of receipt of this order, it said.
During the intervening period, Sahara AMC shall not take on new clients in its business under the above mentioned Certificate of Registration, it added.
SEBI has informed the company to either transfer its business to another SEBI registered portfolio manager or allow the client to withdraw the securities and funds in its custody at the option of the client without any additional cost to the client from the date of cancellation of certificate as a portfolio manager. The option shall be granted to each client separately.
Sahara MAC is a part of the business conglomerate Sahara Group. It had a Rs 147 crore ($23.77 million) under management as of end of last year.