Sebi fine highlights Axis Trustee delay in Embassy REIT disclosure tied to NFRA order

Sebi has imposed a Rs 10 lakh penalty on Axis Trustee Services Ltd. The regulator cited disclosure and governance failures linked to Embassy Office Parks REIT. Sebi said the lapses involved delayed information to unitholders and weak follow-up on compliance steps. The case also referred to findings against a former chief executive at the REIT manager.

Representative image

The matter traced back to an August 19, 2024, order by the National Financial Reporting Authority (NFRA). NFRA found Aravind Maiya, then CEO of Embassy Office Parks Management Services Pvt Ltd, guilty of professional misconduct. NFRA imposed a Rs 50 lakh penalty. NFRA also barred Maiya from audit work for ten years.

Sebi action on Axis Trustee Services and Embassy Office Parks REIT disclosure

In an order dated April 29, Sebi said Axis Trustee Services learnt of the NFRA order on August 20, 2024. Sebi said unitholders were informed only after 53 days. The regulator treated the information as material. Sebi said it affected the CEO’s competence and integrity. Sebi said such details needed quick disclosure.

Sebi said disclosure duties mainly sit with the REIT manager. Sebi added that the trustee also has a parallel duty. Sebi said the trustee should act early and ensure compliance. Sebi also said the trustee should respond fast when disclosures are delayed. Sebi held that Axis Trustee Services did not meet this proactive standard.

Sebi direction on fit and proper review for Embassy Office Parks REIT leadership

Sebi also flagged a separate gap after its direction on August 20, 2024. The regulator said the trustee did not independently check if Maiya met fit and proper person standards. Sebi said this assessment should have been done by the trustee. Based on these failures, Sebi concluded Axis Trustee Services Ltd breached REIT regulations.

Embassy Office Parks Management Services Pvt Ltd is the manager of Embassy Office Parks REIT. Embassy REIT is Indias first publicly listed Real Estate Investment Trust REIT. The REIT was sponsored by Bengaluru-based realty firm Embassy Group and global investment firm Blackstone. These parties were part of the structure Sebi reviewed in the case.

Sebi interim steps for Embassy Office Parks REIT management changes

Sebi issued an interim order on November 4, 2024. The regulator directed the manager to suspend Maiya. Sebi also ordered the appointment of an interim CEO. Ritwik Bhattacharjee was then named interim CEO. Bhattacharjee was later replaced by Amit Shetty as CEO of Embassy Office Parks REIT.

Sebi’s April 29 order kept the focus on trustee accountability in REIT oversight. The regulator said timely, material disclosure to unitholders was essential. Sebi also stressed independent checks on fit and proper norms. With the leadership change already completed, the penalty addressed the earlier disclosure delay and governance gaps.

With inputs from PTI