Monetary frauds within the Indian capital markets have advanced from easy diversions of shareholder funds to advanced schemes involving regulatory arbitrage, Securities and Alternate 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 latest instances.
Shell constructions and promoter-linked diversions
“We should safeguard market integrity, the muse that fuels investor participation and sustains capital formation,” ANI quoted him as saying.
Citing examples of egregious circumstances, Pandey mentioned SEBI investigations have revealed a number of situations 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 in opposition to these belongings have been then used to repay the excellent mortgage of a promoter linked entity”.
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Spherical-tripping, deceptive disclosures beneath scanner
In one other occasion, an organization inflated its financials by coming into into round transactions with a variety of named lending entities. The promoters subsequently siphoned off shareholder funds or belongings by means of 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 circulation to the corporate, have been as an alternative siphoned off.
In a single case, the funds raised by means of preferential allotment have been round-tripped again to the allottees themselves utilizing advanced, multi-layered transactions. He added “Solid financial institution statements have been submitted to SEBI to indicate receipt of funds by the corporate. The statutory auditor additionally didn’t report the structured circulation of funds”.
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The SEBI chairman additionally warned in regards to the misuse of preferential allotment and deceptive disclosures. He mentioned that deceptive info is typically intentionally made public simply earlier than the expiry of the lock-in interval on shares issued by means of preferential allotment.
This permits the preferential allottees to exit at a revenue, usually at the price of retail traders who belief the deceptive disclosures.
“These are egregious circumstances. I am not saying this can be a generalised phenomenon. I am simply supplying you with sure examples of egregious circumstances which have been detected,” Pandey mentioned. He added that the adverse affect of such monetary frauds on the securities market is great and SEBI is doing forensic audits to uncover these type of monetary frauds.
(With inputs from ANI)
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