SEBI Gives Relief To Max Financial, Axis Bank InMax Life Share Deal C

The Securities and Exchange Board of India (SEBI) has dropped proceedings against Max Financial Services, Max Life Insurance, Axis Bank, Axis Capital, Axis Securities and seven individuals in a case linked to transactions involving Max Life Insurance.

SEBI said the allegations of disclosure lapses and fraud were not established.

Whole Time Member Amarjeet Singh passed the final order, finding that neither the fraud nor the disclosure allegations against the twelve noticees could be sustained.

What Was The Case About?

SEBI's investigation covered transactions between Max Financial, Max Life and Axis Bank from FY10 to FY22. The regulator examined whether the entities had breached securities laws, listingrules and fraud regulations through a series of Max Life share sale and buyback arrangements.

A show-cause notice issued in October 2024 alleged that Max Financial had made inadequate or delayed disclosures about its bancassurance arrangement with Axis Bank and related share transactions in 2010, 2015 and 2020.

It also alleged that Max Financial, Max Life and Axis Group entities had devised a fraudulent scheme that benefited Axis Bank at the expense of Max Financial and its shareholders.

What Happened In The Three Deals?

Under the 2010 arrangement, Max Life issued shares to Axis Bank at ₹10 per share. The shares were later bought back in tranches at prices ranging from ₹54 to ₹111 per share.

In 2015, Max Financial and Mitsui Sumitomo sold a 4.99% stake in Max Life to Axis Bank at ₹10 per share. Part of the stake was later bought back at a higher price.

Under the 2020 arrangement, Max Financial sold stakes in Max Life to Axis Bank, Axis Capitaland Axis Securities. In March-April 2021, it transferred 9.002% of Max Life to Axis Bank, 2% to Axis Capital and 1% to Axis Securities. Max Life later became Axis Max Life Insurance.

The show-cause notice alleged that these transactions caused a loss of ₹3,912 crore to Max Financial and gave a corresponding benefit to Axis Group entities.

Why Did SEBI Drop The Charges?

On the disclosure allegations, SEBI noted that the rules for listed companies had changed significantly over the period.

The older listing agreement gave more room for judgement on materiality, while the later LODR framework introduced clearer thresholds and guidance.

SEBI said Max Financial's disclosures could have been more comprehensive. However, it foundno material establishing a violation of the specific provisions cited in the show-cause notice.

The regulator said liability could not be sustained simply because some disclosures could havebeen fuller.

On the fraud allegations, SEBI said active concealment of material information by Max Financial was not established.

It also found no evidence of price or volume manipulation, creation of an artificial market or other interference with market integrity.

The regulator said the show-cause notice also did not establish injury from the alleged wrongful acts or circumstances showing an intention to defraud or manipulate the securities market.

As a result, SEBI held that the allegation of a fraudulent scheme involving Max Financial, MaxLife, Axis Bank, Axis Capital, Axis Securities and the other noticees was not established.

Irdai Had Earlier Penalised Axis Bank, Max Life

The matter also involved earlier findings by the Insurance Regulatory and Development Authority of India (Irdai).

Irdai had informed SEBI that it imposed a ₹2 crore penalty on Axis Bank and ₹3 crore on MaxLife for violating its directions.

Irdai had observed that the transactions circumvented limits on commission, remuneration orreward payable to insurance agents and intermediaries.

SEBI's latest order relates to the securities law allegations before it and drops thoseproceedings against the 12 notices..

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