Description

SEBI settles case against Brookprop Management Services for using borrowed funds to facilitate REIT distribution, with INR 20.47 lakh penalty.

Summary

SEBI has settled adjudication proceedings against Brookprop Management Services Private Limited for violating REIT regulations by using borrowed funds to facilitate distribution of Net Distributable Cash Flow (NDCF). The company agreed to pay INR 20,47,500 as settlement amount without admitting or denying the violations.

Key Points

  • Brookprop Management Services violated regulation 7(d) read with clause 5 and clause 7 of Schedule VI of SEBI REIT Regulations, 2014
  • Company used borrowed funds for facilitating distribution of Net Distributable Cash Flow
  • Settlement application filed on July 26, 2024 under Settlement Application No. 7975/2024
  • High Powered Advisory Committee recommended settlement on June 5, 2025
  • Panel of Whole Time Members approved the recommendation on August 18, 2025
  • Settlement amount of INR 20,47,500 paid on September 1, 2025

Regulatory Changes

No new regulatory changes introduced. Case reinforces existing REIT regulations regarding prohibition on using borrowed funds for distributions.

Compliance Requirements

  • REITs and their managers must ensure distributions are made from available cash flows, not borrowed funds
  • Strict adherence to SEBI REIT Regulations, 2014 regarding distribution mechanisms
  • Proper documentation and compliance with Schedule VI requirements

Important Dates

  • Show Cause Notice: June 11, 2024
  • Settlement Application: July 26, 2024
  • HPAC Recommendation: June 5, 2025
  • Panel Approval: August 18, 2025
  • Settlement Amount Payment: September 1, 2025

Impact Assessment

Moderate impact limited to the specific entity and REIT sector. The settlement reinforces SEBI’s regulatory oversight of REIT operations and distribution practices. The case serves as a precedent for proper compliance with REIT distribution regulations, particularly regarding the prohibition on using borrowed funds for cash distributions.

Impact Justification

Settlement order for REIT regulation violation with moderate penalty affecting specific entity