The Edelweiss group’s alternative investment arm and its stressed assets fund have settled allegations with the Securities and Exchange Board of India (SEBI) regarding conflicts of interest and failure to act in the best interest of investors. The allegations were raised in a show-cause notice issued by SEBI in July 2024, which claimed that the fund and its manager had failed to exercise independent professional judgment and had submitted inaccurate information to its trustee.
To address these allegations, the fund and its manager have established a ‘Fund Board’ with two independent members and a Governance Committee to handle conflict of interest situations. They have also paid a total of Rs 61.42 lakh (approximately $69,250) to settle the allegations. Additionally, the executives who were found to be in default have been removed from the Investment Committee and will not be allowed to engage or associate with the company in any manner for 12 months.
The Edelweiss Stressed and Troubled Assets Revival Fund was launched in 2012 with a target of raising up to Rs 500 crore. The fund focused on investing in stressed assets in the fashion and textile industry, and one of its portfolio companies was the materials manufacturer Blue Blends (India) Ltd. The fund and its manager filed settlement applications with SEBI last year, and the terms of the settlement were finalized in May 2025.
The settlement terms were put forward by SEBI’s Internal Committee and included the fine paid by the fund and its manager, as well as the submission that the irregularities had been addressed and that the executives should be held liable for their actions. SEBI’s High Powered Advisory Committee reviewed the settlement terms and found them acceptable, subject to the non-monetary term that the officers-in-default would not engage or associate with the company in any manner.
The settlement of these allegations marks a significant development in the Indian alternative investment space, highlighting the importance of transparency and accountability in the management of stressed assets. The establishment of a ‘Fund Board’ and a Governance Committee to handle conflict of interest situations demonstrates the fund’s commitment to acting in the best interest of its investors. The removal of the executives who were found to be in default and the imposition of a 12-month ban on their association with the company also serves as a deterrent to similar behavior in the future.