sebi:QJA/SS/CFD/CFD-SEC-5/32324/2025-26

SEBI · SEBI · 2025-12-30 · Santosh Kumar Shukla, Quasi-Judicial Authority

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Noticee prohibited from soliciting and accepting any new client for the activity as a Merchant Banker for a period of one month from the date of receipt of the Order; certain allegations not sustained.

Provisions invoked

• s. 11B
• s. 15
• s. 19
• s. 15I
• s. 12(3)

Regulations

• Reg. 2(c)
• Reg. 3
• Reg. 13
• Reg. 2(1)(c)
• Reg. 3(a)
• Reg. 8
• Reg. 27
• Reg. 26(1)
• Reg. 26
• Reg. 3(1)
• Reg. 3(5)
• Reg. 9A(1)
• Reg. 9A(1)(e)
• Reg. 9A
• Reg. 13A
• Reg. 13A(2)
• Reg. 9A(e)

Parties

• M/s AFCO Capital India Private Limited

Holding

The Noticee, a SEBI-registered Merchant Banker, was found to have violated Regulation 9A(1)(e) and Regulation 13 read with Clause 18 of Schedule III of the Merchant Bankers Regulations by outsourcing core functions to an unauthorized person and failing to maintain access controls, and was prohibited from soliciting and accepting new clients as a Merchant Banker for one month. The allegation regarding misrepresentation of Mr. Mohan Babu as Director in the Escrow Agreement was not sustained.

Full text

Order in respect of M/s AFCO Capital India Private Limited Page 2 of 26 B. Report of the Designated Authority. 4. Pursuant to the inspection, SEBI initiated proceedings under section 12(3) of the SEBI Act read with Intermediaries Regulations and a Designated Authority (“DA”) was appointed for conducting proceedings in accordance with the Intermediaries Regulations.

Order in respect of M/s AFCO Capital India Private Limited Page 3 of 26 d. Noticee had made disclosures regarding the Acquirer Company in the letter of offer which were based on the undertaking provided by the Acquirer, and had relied on these disclosures following a widely accepted methodology in good faith. Noticee hereby undertakes to take necessary additional steps to independently verify the details provided by the party. e. Mr. SSRK Mohan Babu was associated with its Promoter Group Companies for over 20 years in the capacity of an Advisor or a Consultant. He previously worked with one of the leading Category I Merchant Banker. During this time, he has played a vital role in various assignments, leveraging his extensive experience and deep understanding of Merchant Banking operations. Due to conflict of interest, he was not officially on Company’s payroll. Considering that both the Acquirer and Mr. SSRK Mohan Babu were based in Hyderabad, his involvement was deemed essential for efficient execution of this time sensitive acquisition. However, during the relevant time, Noticee was in process of appointment of a Compliance Officer, therefore, Mr. SSRK Mohan Babu was appointed as an Authorized Signatory, as an interim measure, to sign documents, operate escrow account and to represent the Company, ensuring compliances with the regulatory deadlines and facilitating smooth progress of the transaction. f. Noticee had not outsourced its core activities or compliance functions.

Order in respect of M/s AFCO Capital India Private Limited Page 4 of 26 h. During the correspondence with all authorities involved in the process of open offer, Mr. SSRK Mohan Babu was never presented as a director of AFCO. However, he has inadvertently signed as Director. The designation mentioned in the agreement was inadvertent and unintentional and it occurred due to oversight. i. Noticee held board meeting on November 19, 2024, during said meeting the Company presented the draft of Code of Conduct for intermediaries, as per Schedule C of SEBI (PIT) Regulation, 2015. The Code was adopted and formally approved by its board. j. Noticee appointed Nikita Bansal as a Compliance Officer w.e.f October 15, 2023. Ms. Nikita Bansal has cleared the NISM Series IIIA Certification Examination on November 21, 2023 i.e. after gap of 36 days. k. Noticee has also procured the necessary SDD software for maintaining a Structured Digital Database (SDD) to ensure compliance with the requirements outlined under the PIT Regulations. The invoice/bills relating to the same and the copy of the bank statement evidencing payments of the said invoice is submitted. l. Noticee is a part of AFCO GROUP and is having same promoters and Directors. Noticee has a separate division, which is secured with lock and key arrangement. Access to division is permissible only to employees of the Merchant Banking division. As suggested by inspection team a bio-metric was also installed outside the Merchant Banking Div

Source: SecMarx — sebi:QJA/SS/CFD/CFD-SEC-5/32324/2025-26. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.