SEBI disposes proceedings against Max Financial, Max Life, Axis entities in Rs 3,911 crore case

Market regulator Securities and Exchange Board of India SEBI has dropped the proceedings against Max Financial Services Max Life and Axis Group entities over an alleged Rs 3911 crore loss to shareholdersIn a final order passed on Monday the regulator said that disclosure lapses and a fraudulent scheme were not established and disposed proceedings against seven individuals including Max Group founder and Chairman Analjit SinghWhat is the caseThe proceedings arose from a Show Cause Notice SCN issued on October 24 2024 following an investigation into transactions between the Max and Axis entities during 200910 to 202122 as per PTI There were allegations that Max Financial failed to make adequate and timely disclosures about the transactions and that Max Financial Max Life and Axis entities devised a scheme that provided undue benefits to Axis Bank at the expense of Max entities and their shareholdersThe regulator examined three sets of arrangements entered into in 2010 2015 and 2020 between these entitiesThe 2010 arrangement involved issuing Max Life shares to Axis Bank at par followed by their acquisition through multiple tranches at progressively higher pricesThe 2015 arrangement involved an agreement between Max Financial Mitsui Sumitomo Insurance Company and Axis Bank for the transfer of nearly 499 per cent of Max Life These shares were subsequently bought back in tranches at higher pricesThe 2020 arrangement initially intended Axis Bank planning to acquire 29002 per cent stake in Max Life and upon regulatory discussions the arrangement was revised with Axis entities eventually acquiring the stake in Max Life in MarchApril 2021Max Life Insurance Company is now known as Axis Max Life Insurance post the dealThe market regulator in the SCN had alleged that the transactions were structured to provide benefits to Axis entities beyond permissible commissions and that the arrangements caused a loss of Rs 391195 crore to Max Financial Services MFSL shareholders and corresponding benefits to Axis Group entitiesHowever these were allegations were not established by SEBI as per PTISEBI Whole Time Member Amarjeet Singh pointed out that the discloure framework applicable to listed entities had evolved considerably since 2010 He said the disclosures by MFSL could have been more comprehensive adding that a more cautious approach may have been desirableSingh stated that the conduct had to be assessed against the legal requirements prevailing at the relevant time rather than retrospectively and added that in the absence of material establishing violation of the specific provisions invoked in the SCN the disclosure related charges cannot be sustainedSEBI rejects allegation of a fraudulent schemeThe capital market regulator further said active concealment of material information by Max Financial had not been establishedSEBI found no evidence of manipulation of price or volume creation of an artificial market or other interference with market integrity and thus the allegation that Max Financial Max Life Axis Bank Axis Capital and Axis Securities had devised a fraudulent scheme to defraud Max Financial shareholders was therefore not establishedIn the absence of the underlying disclosurerelated violations or fraud being established against MFSL and for the reasons regarding their individual roles and liabilities the charges against the key managerial personnels of MFSL also cannot be sustained Sebi said in a 114page orderSeparately the order noted that the SCN had been issued to 25 entities Of these 13 entities who were NonExecutive Independent Directors of MFSL have filed settlement applications which are currently under process according to PTIUnder the SEBIs Settlement Proceedings Regulations 2018 filing a settlement application for any specified proceedings will not affect the continuance of the proceedings except that passing the final order is required to be kept in abeyance till the application is resolvedIn compliance with these rules SEBI kept proceedings against these 13 entities in abeyance while passing the final order against the remaining noticesWith inputs from PTI