Sebi Fines 13 Individuals Rs 33.81 Crore for Flouting Norms

New Delhi: Capital markets regulator Sebi on Friday imposed fines totalling Rs 33.81 crore on 13 individuals, including senior officials of Sharepro Services I Pvt Ltd, for flouting regulatory norms. The regulator imposed a fine of Rs 15.8 crore on Indira Karkera, Vice President and client manager for a number of client companies of Sharepro, and Rs 5.16 crore on Govind Raj Rao, Managing Director.

Fines for Senior Officials

Apart from senior officials, Sebi also penalised Balram Mukherjee, Pradeep Rathod, Shrikant Bhalakia, Anil Jathan, Chetan Shah, Sujitkumar Amarnath Gupta, Bhavani Jathan, Anand S Bhalakia, Dayanand Jathan, Mohit Karkera and Rajesh Bhagat.

Misappropriation of Securities and Dividends

In its 200-page order, Sebi found that at least securities worth Rs 60.45 crore on the basis of the value of respective scrip in October 2016 and dividends worth Rs 1.41 crore of genuine shareholders were misappropriated in the fraud.

Further, certain unlisted securities of genuine shareholders were also misappropriated in the fraud. Sebi Adjudicating Officer Asha Shetty said in the order that the non-maintenance and non-submission of records by the noticees limited the instances of misappropriation that could be investigated by the regulator and only misappropriation of assets of Rs 61.86 crore of genuine shareholders could be identified.

Challenges in Computing Ill-Gained Profit

The markets watchdog also observed that Rs 61.86 crore worth of securities and dividends were identified as misappropriated, but the records and analysis are limited in terms of fund trails and records, identifying how much each of the individuals misappropriated the genuine investors' assets as ill-gained profit.

Asha Shetty added that the proceedings in respect of some of the noticees have been abated, lots of the funds were withdrawn in cash, and the established fund and securities trail to the remaining noticees found guilty of the fraud, doesn't add up to the entire value of the assets misappropriated. Therefore, it is not possible to compute the exact ill-gained profit made by each of the noticee found guilty of fraud.

Anonymous Complaint Triggers Investigation

The order came after Sebi received an anonymous complaint dated October 20, 2015, and thereafter, it conducted an investigation to examine in detail the records of Sharepro. In March 2016, the regulator passed an interim order against Sharepro and 15 other entities, and subsequently, the directions were confirmed through a confirmatory order against all but one entity.

The investigation revealed the fraudulent siphoning of dividends by backwards working from the bank accounts of the entities. It was also observed that the records of fraudulent transfer of shares at the office of Sharepro were massively falsified and that the system/database of the firm shows that dividends were paid to the original shareholders, but the verification of the bank accounts revealed that the dividends were paid to persons who were not the rightful shareholders or were not at all the shareholders of the companies.

Thus it was alleged that not only the dividend due to genuine investors was fraudulently siphoned off but the records were falsified so as not to reflect the correct position.

Previous Action Against Sharepro

In July 2020, Sebi barred share transfer agent Sharepro Services, its three senior officials and 24 other entities, including Govind Raj Rao and Indira Karkera from the securities market in a matter related to diversion of assets.

The Securities and Exchange Board of India (Sebi) has imposed fines totalling Rs 33.81 crore on 13 individuals, including senior officials of Sharepro Services I Pvt Ltd, for flouting regulatory norms. The fines were imposed after an investigation revealed the fraudulent siphoning of dividends and falsification of records. Sebi has also barred Sharepro Services and its senior officials from the securities market in a related matter.