Description

SEBI imposes penalty on SSRK Mohan Babu for misrepresenting himself as Director instead of Advisor in MB Escrow Agreement for Standard Shoe Sole and Mould (India) Limited open offer, violating PFUTP Regulations.

Summary

SEBI’s Adjudication Officer issued Order No. Order/SM/RG/2025-26/31939 against SSRK Mohan Babu (PAN: AKRPS5385H) under Section 15-I of the SEBI Act, 1992 for violations of Regulation 3(a) and Regulation 4(1) read with 2(1)(c)(3) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. The proceedings relate to SSRK Mohan Babu’s role in the open offer of Standard Shoe Sole and Mould (India) Limited, where he was associated with AFCO Capital India Private Limited, Merchant Banker.

Key Points

  • SSRK Mohan Babu knowingly misrepresented himself as Director in the MB Escrow Agreement when he was actually an Advisor to the Merchant Banker
  • The misrepresentation constitutes concealment of fact by a person having knowledge or belief of the fact
  • Adjudication proceedings initiated under Section 15-I of SEBI Act, 1992
  • Show Cause Notice (SEBI/EAD-5/AN/RG/15013/1/2025) issued on June 09, 2025
  • Shri Amar Navlani initially appointed as Adjudicating Officer on March 13, 2025, later transferred and replaced on September 19, 2025
  • During inspection, MB was asked to provide details of officials handling the open offer
  • MB submitted that SSRK Mohan Babu was “Advisor to the Merchant Banker and Authorized Signatory”

Regulatory Changes

No new regulatory changes introduced. This order enforces existing provisions under SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

Compliance Requirements

  • Merchant Banker advisors and officials must accurately represent their designation and role in all official documents and agreements
  • Escrow agreements and open offer documentation must contain truthful information about signatories and their designations
  • Officials associated with Merchant Bankers must not conceal material facts regarding their actual position or authority
  • Compliance with Section 15HA of SEBI Act, 1992 regarding penalties for violations

Important Dates

  • March 13, 2025: Original Adjudicating Officer appointed
  • June 09, 2025: Show Cause Notice issued
  • June 10, 2025: SCN served via Speed Post and digitally signed email
  • September 19, 2025: New Adjudicating Officer appointed following transfer
  • December 30, 2025: Order date (inferred from circular ID)

Impact Assessment

Market Impact: Low to medium - This case involves an individual advisor’s misrepresentation in documentation rather than systemic market manipulation or widespread fraud.

Compliance Impact: Medium - Reinforces the importance of accurate disclosure of roles and designations in open offer documentation and escrow agreements. Merchant Bankers and their advisors must ensure complete transparency in their representations.

Regulatory Precedent: Establishes that misrepresentation of one’s official designation in regulatory documents, even if the person had authorization to act, constitutes a violation of PFUTP Regulations and attracts penalties under Section 15HA of SEBI Act.

Industry Impact: Serves as a reminder to all merchant banking professionals and advisors that accuracy in disclosure of official capacity is critical, and misrepresentation - even regarding titles - will be treated as fraudulent conduct.

Impact Justification

Individual advisor penalized for misrepresentation in open offer documentation; medium impact as it relates to procedural compliance rather than systemic market issues