Description

SEBI has restrained First Overseas Capital Limited from accessing the securities market and prohibited from dealing in securities for 2 years effective October 23, 2025, due to multiple regulatory violations including net worth requirements and underwriting obligations.

Summary

SEBI has issued an order (WTM/AS/CFD/CFD-SEC-4/31729/2025-26 dated October 23, 2025) restraining First Overseas Capital Limited (PAN: AAACL4737A, Registration No: INM000003671), a registered Merchant Banker, from accessing the securities market for a period of 2 years. The entity is prohibited from buying, selling or dealing in securities, directly or indirectly, or being associated with the securities market in any manner. This action follows inspections conducted on August 24-25, 2022 (for period April 1, 2021 to March 31, 2022) and February 14-15, 2024 (for period April 1, 2022 to October 31, 2023) which revealed multiple serious regulatory violations.

Key Points

  • First Overseas Capital Limited barred from securities market for 2 years from October 23, 2025
  • Entity prohibited from buying, selling, or dealing in securities directly or indirectly
  • SEBI order references two previous orders: WTM/AN/CFD/CFD-SEC-4/31702/2025-26 (October 3, 2025) and WTM/AS/CFD/CFD-SEC-4/31729/2025-26 (October 23, 2025)
  • Any open derivative positions must be closed within 3 months or at contract expiry, whichever is earlier
  • Violations include failure to maintain Rs 5 crore net worth requirement under MB Regulations
  • Consolidated list of debarred entities available on NSE website

Regulatory Changes

No new regulatory changes introduced. This circular enforces existing SEBI (Merchant Bankers) Regulations, 1992 and SEBI (Intermediaries) Regulations, 2008.

Compliance Requirements

  • NSE members must take note of the debarment and ensure compliance
  • First Overseas Capital Limited must close all open derivative positions within 3 months from October 23, 2025 or at contract expiry, whichever is earlier
  • Market participants should refer to the updated consolidated list of SEBI debarred entities at: https://www.nseindia.com/regulations/member-sebi-debarred-entities
  • Members should avoid transacting with or facilitating market access for the debarred entity

Important Dates

  • October 3, 2025: First SEBI order issued (WTM/AN/CFD/CFD-SEC-4/31702/2025-26)
  • October 23, 2025: Current SEBI order issued; 2-year market ban becomes effective
  • January 23, 2026 (approximately): Deadline for closing open derivative positions (3 months from order date)
  • October 23, 2027: Expected end date of 2-year debarment period

Impact Assessment

Market Impact: Limited direct market impact as this affects one registered merchant banker. However, it reinforces SEBI’s strict enforcement of net worth and compliance requirements for intermediaries.

Regulatory Impact: Demonstrates SEBI’s ongoing vigilance in monitoring registered intermediaries through inspections covering periods from 2021-2023. The order reveals serious violations including:

  • Non-maintenance of mandatory Rs 5 crore net worth
  • Engaging in non-securities business
  • Exceeding underwriting obligations (more than 20x net worth)
  • Accepting public deposits for underwriting obligations
  • Submitting false/misleading information to SEBI
  • Failure to report securities acquisitions and submit half-yearly reports

Operational Impact: First Overseas Capital Limited must cease all securities market activities immediately. Any clients or counterparties must be informed and alternative arrangements made. The 3-month window for closing derivative positions provides limited time for orderly exit.

Violations Identified

Based on inspection findings from February 14-15, 2024:

  1. Non-maintenance of adequate net worth (Rs 5 crore requirement)
  2. Indulging in business other than securities market activities
  3. Undertaking underwriting obligations exceeding 20 times net worth
  4. Accepting public deposits for fulfilling underwriting obligations
  5. Submission of false and misleading information to SEBI
  6. Failure to intimate SEBI about acquisition of securities of companies whose issues were managed by the MB
  7. Failure to submit half-yearly reports
  8. Key Management personnel violations (document appears truncated)

Impact Justification

High importance due to SEBI debarment order with 2-year market ban for registered intermediary. Medium impact as it affects one merchant banker rather than broad market operations.