Source: BS
Context:
India’s market regulator barred Man Industries and three of its top executives, including the chairman, from accessing the securities markets for two years over alleged fund diversion, according to an order issued.
Reason for Action:
- Diversion of funds to subsidiaries.
- Misrepresentation of financial statements by not consolidating subsidiary accounts.
- Non-disclosure of related-party transactions.
- Rotation of funds and failure to disclose material events.
SEBI Guidelines on Misuse of Funds
| Aspect | Key Points |
|---|---|
| Prohibition on Misuse | Funds raised via IPO, preferential allotment, or debt must be used as disclosed; diverting to promoters/directors without approval is banned. |
| Disclosure Requirements | All material transactions and related-party dealings must be reported to stock exchanges and in annual financial statements; deviations in fund usage must be disclosed promptly. |
| Corporate Governance | Independent directors oversee fund use and approve related-party transactions; audit committees review fund allocation and financial statements. |
| SEBI Investigation & Enforcement | SEBI can inspect, audit, and requisition data; violations can lead to capital-raising bans, board prohibitions, and monetary penalties. |
| Investor Protection | SEBI can direct recovery of misused funds; companies must refund diverted funds to investors. |
