Description

SEBI final order against six individuals including Kapil and Dheeraj Wadhawan for fund siphoning and financial misrepresentation at DHFL.

Summary

SEBI issued a final order under multiple sections of SEBI Act 1992 and Securities Contracts Regulation Act 1956 against six individuals including promoters Kapil Wadhawan, Dheeraj Wadhawan, Rakesh Wadhawan, Sarang Wadhawan, Harshil Mehta, and Santosh Sharma in the matter of Dewan Housing Finance Corporation Limited (DHFL). The order addresses allegations of fund siphoning to promoter-related entities and misrepresentation of financial statements.

Key Points

  • Six noticees including four members of Wadhawan family face enforcement action
  • Allegations include siphoning funds to Promoter related and connected entities
  • DHFL allegedly misrepresented its financial statements to investors
  • Case involves “Bandra Branch” operations and “Bandra Book Entities (BBEs)”
  • BBEs allegedly issued disproportionately high value loans despite weak financials
  • Accounting software allegedly used to camouflage fund diversions
  • Violations of related party transaction regulations examined
  • Order spans 181 pages indicating comprehensive investigation

Regulatory Changes

No new regulatory changes introduced. This is an enforcement order applying existing provisions under SEBI Act sections 11(1), 11(4), 11(4A), 11B(1), 11B(2), 15A(a), 15HA, 15HB and Securities Contracts Regulation Act section 23H.

Compliance Requirements

  • Entities must ensure proper disclosure of related party transactions
  • Housing finance companies must maintain accurate financial reporting
  • Promoters must comply with fund utilization and corporate governance norms
  • Proper approval processes required for large value loans
  • Transparent accounting practices mandatory

Important Dates

  • Order reference: WTM/AN/CFID/CFID/31591/2025-26
  • Final order issued in August 2025
  • Specific effective dates and compliance deadlines to be determined from full order text

Impact Assessment

High impact enforcement action in housing finance sector. Reinforces SEBI’s commitment to investigating fund diversions and financial misrepresentation. Case sets precedent for promoter accountability in financial institutions. Likely to enhance investor confidence through demonstration of regulatory oversight. May impact other housing finance companies’ compliance practices and governance standards.

Impact Justification

Major enforcement action against DHFL promoters for large-scale fund diversion affecting investors and market integrity