The Securities and Exchange Board of India (SEBI) has barred merchant banker First Overseas Capital Limited (FOCL) from the securities market for two years and imposed a penalty of Rs 20 lakh for repeated violations of regulatory norms.The market regulator’s action comes after two inspections: one in August 2022, which covered April 2021 to March 2022, and another in February 2024, which covered April 2022 to October 2023.
Numerous violations were found during the inspections, such as underwriting commitments that exceeded 20 times the company’s net worth, participation in non-securities market activities, and failure to maintain the required minimum net worth of Rs 5 crore.
In blatant violation of merchant banking laws, SEBI claims that FOCL also took deposits from the general public in order to fulfil these commitments. Additionally, the business failed to file half-yearly reports, provided false information, and neglected to confirm that its key managers had current NISM certifications.
Despite receiving warnings from SEBI in 2022 and 2023, the company did not rectify the deficiencies. FOCL was also found to have incomplete track record disclosures on its website, omitting key details such as issue type, subscription level, QIB holding, issuer financials, price data, and utilisation of issue proceeds, in violation of SEBI’s public issue disclosure norms.
After receiving instructions from the Securities Appellate Tribunal (SAT), the regulator noticed that FOCL had not complied with the net worth requirement since FY2018–19. The persistent non-compliances, according to SEBI, presented possible risks to clients and investors.
For two years, SEBI has prohibited FOCL from accepting any new issue management assignments as part of the order. Additionally, the company must pay the Rs 20 lakh penalty within 45 days of receiving the order and close all open derivative positions within three months.