What prompted the SEBI order against the CEO of India’s first publicly listed REIT?- The Week

Aravind Maiya, the chief executive officer of Embassy REIT (Real Estate Investment Trust), is stepping down with immediate effect. The moves follows an interim order issued by the Securities and Exchange Board of India (SEBI) that directed Embassy Office Parks Management Services, the manager of Embassy REIT, to suspend Maiya and appoint an interim CEO.

Embassy Office Parks is India’s largest and first publicly traded REIT, operating a portfolio of 51.1 million square feet comprising office parks and city centre office buildings.

The market regulator noted that Maiya didn’t meet the “fit and proper” criteria for the position.

What prompted the SEBI order against Maiya and Embassy?

Back in August, the National Financial Reporting Authority (NFRA) had issued an order following its investigation of statutory auditors of Coffee Day Enterprises (CDEL) on their role in alleged financial irregularities at the coffee retailer in 2018-19. Maiya was the engagement partner at the auditor for Coffee Day Enterprises during that period.

“In the case of Mr. Aravind Maiya, NFRA found glaring lapses in the audit carried out under his charge and relied on by the company, shareholders and investors. Mr. Aravind Maiya was seemingly aware of the relevant details and was in a position to have highlighted wrongdoing by CDEL/ its subsidiaries/ related entities/ promoters. By not conducting a diligent audit and not ensuring the timely flagging of a large fraud, a disservice was done to public/ investors at large,” it said.

The NFRA had debarred Maiya for a maximum possible 10 years. While, the NFRA order has been challenged by Maiya before the appellate forum, SEBI found that he didn’t meet the “fit and proper criteria” in the interim period.

“SEBI is well within its mandate to ensure that Mr. Aravind Maiya serves out his debarment due to professional misconduct, instead of making a mockery of it by taking on other ostensibly unconnected leadership roles which require even greater professional competence and integrity in the financial field,” the markets regulator said.

It added that the principles and values underlying fit and proper person determination would mean that such a person who committed grave misconduct closely connected to securities market fraud, is considered a persona non grata for leadership roles across organisations, especially large intermediaries handling significant investor funds, till his name is cleared.

SEBI also criticised Embassy REIT for not acting against Maiya earlier despite its emails and instructions.

“More than one month has passed since the NFRA order became effective vis-à-vis Mr. Aravind Maiya. Despite SEBI’s communication regarding Mr. Aravind Maiya being ineligible for appointment as CEO of the manager to Embassy REIT due to disqualification in terms of the fit and proper person criteria, the manager has refused to replace him. It is a matter of concern that irrespective of e-mails, meetings and a specific instruction in this regard, the manager has tried all means to retain Mr. Aravind Maiya as CEO,” the interim order read.

Embassy REIT said on Tuesday while it was reviewing the order and evaluating all options, in compliance with SEBI’s directive, effective immediately, Maiya will be stepping down as CEO. He will assume the role of head of strategy for Embassy REIT, it added.

“The REIT’s Board, and the management team will oversee all its operations and capital allocation to ensure that normal business is not compromised in any manner whatsoever, while evaluating the most appropriate approach for the interim CEO position,” it notified.

In the wake of the SEBI order, shares of Embassy Office Parks REIT slipped around 2.5 per cent in intra-day trading. While they recovered slightly, the scrip was still down 1.9 per cent at Rs 394.79 in afternoon trades on the BSE.