SEBI Bars 'First Overseas Capital' From Securities Market For 2 Years, Imposes ₹20 Lakh Penalty For Multiple Violations

This included misrepresentation of financial position, non-compliance with net worth requirements, and engaging in non-securities market activities.

In an order passed by Whole Time Member Amarjeet Singh, SEBI observed that FOCL's conduct reflected malice.

“Such acts,by a SEBI registered intermediary, on a repetitive basis, cannot be said to have been done in good faith and reek of mala fide on part of the Noticee. Therefore, directions and penalties need to be imposed on the Noticee in proportion to the violations committed by it.”

The regulator said the firm's repeated non-compliance and inaccurate submissions “not only violate regulatory provisions but also expose the clients of the Noticee to risk.”

The order stemmed from inspections of FOCL from April 2021 to October 2023. During inspections in August 2022 and February 2024. During the inspections, SEBI found that FOCL repeatedly failed to maintain the mandatory Rs 5 crore net worth. The firm also engaged in activities outside the securities market and took on underwriting obligations far beyond the permitted limit. It accepted public deposits to fund these obligations and submitted misleading information to the regulator.

The company's financial records also showed questionable advances of Rs 7 crore towards a land development project and a Rs 3 crore unsecured loan to an individual, both of which were excluded from valid capital calculations.

SEBI's investigation concluded that FOCL's net worth had been overstated through doubtful loans and misclassified advances, and that the firm had “camouflaged” property-related transactions as investments.

The regulator also found that FOCL accepted Rs 10.30 crore from unrelated parties to fulfill underwriting commitments, in violation of SEBI regulations.

Further, the company was cited for false statements regarding auditor availability, inconsistent disclosures of compliance officers, delays in statutory filings, and failure to ensure that its key managerial personnel held required NISM certifications.

As part of its directions, SEBI restrained FOCL from accessing the securities market and prohibited it from buying, selling, or dealing in securities in any manner for two years. The company was also debarred from taking new issue management mandates for the same duration.

In addition, SEBI imposed a monetary penalty of Rs 20 lakh, including Rs 7 lakh for failure to disclose acquisition details under Regulation 27, Rs 3 lakh for delayed filings, Rs 7 lakh for non-compliance with certification norms, and Rs 3 lakh for incomplete disclosure of issue track records. FOCL has been directed to pay the penalty within 45 days of receiving the order.