The monetary frauds in Indian capital markets have ranged from easy diversion of shareholder funds to the usage of complicated buildings and transactions to bypass regulatory safeguards, Securities and Trade Board of India (SEBI) Chairman Tuhin Kanta Pandey mentioned on Friday.
Addressing the Future Proof Forensics 2025 occasion held in Mumbai, the SEBI chief highlighted how the market regulator has used forensic audits to uncover a number of such frauds in current occasions.
“We should safeguard market integrity, the muse that fuels investor participation and sustains capital formation,” he mentioned.
Citing examples of egregious instances, Pandey mentioned SEBI investigations have revealed a number of cases the place listed firms engaged in fraudulent practices to siphon off investor funds.
He highlighted that in a case, a listed entity transferred its belongings to a subsidiary firm.
He mentioned “SEBI has unearthed transactions the place the listed entity transferred belongings to its subsidiary. The mortgage obtained by the subsidiary towards these belongings had been then used to repay the excellent mortgage of a promoter linked entity”.
In one other occasion, an organization inflated its financials by getting into into round transactions with a variety of named lending entities. The promoters subsequently siphoned off shareholder funds or belongings by related-party transactions beneath the pretext of purchases or gross sales made to or from their very own firms.
Pandey mentioned SEBI additionally discovered that proceeds from preferential allotment, which ought to end in money circulate to the corporate, had been as an alternative siphoned off.
In a single case, the funds raised by preferential allotment had been round-tripped again to the allottees themselves utilizing complicated, multi-layered transactions.
He added “Solid financial institution statements had been submitted to SEBI to point out receipt of funds by the corporate. The statutory auditor additionally didn’t report the structured circulation of funds”.
The SEBI Chairman additionally warned in regards to the misuse of preferential allotment and deceptive disclosures. He mentioned that deceptive data is usually intentionally made public simply earlier than the expiry of the lock-in interval on shares issued by preferential allotment.
This allows the preferential allottees to exit at a revenue, usually at the price of retail buyers who belief the deceptive disclosures.
“These are egregious instances. I am not saying this can be a generalised phenomenon. I am simply providing you with sure examples of egregious instances which have been detected,” Pandey mentioned.
He added that the unfavorable affect of such monetary frauds on the securities market is large and SEBI is doing forensic audits to uncover theses sort of monetary frauds.
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