Daijiworld Media Network - Mumbai
Mumbai, Oct 31: The Securities and Exchange Board of India (SEBI) on Thursday barred Gretex Corporate Services Ltd from taking up any new merchant banking assignments for 21 days, citing violations of regulatory norms and inadequate due diligence in a public issue handled by the firm.
In its order, the market regulator said that Gretex failed to maintain the minimum prescribed net worth of Rs 5 crore during the financial year 2019–20, thereby breaching merchant banker regulations.
SEBI also found serious lapses in the firm’s due diligence while managing an SME public issue, where nearly 40% of the IPO proceeds were allocated for leasing office space that was still under construction. The regulator noted that this crucial detail was neither properly verified nor disclosed to investors.
“The inspection in the present matter revealed not merely minor clerical inconsistencies, but a substantive omission — the merchant banker’s failure to verify the completion status of a property forming nearly 40% of the IPO’s object of issue,” SEBI Chief General Manager N. Murugan said in the order.
“Such an omission goes to the root of the merchant banker’s due diligence obligation and cannot be treated as a minor irregularity,” the order added.
The order, effective immediately, prohibits Gretex from undertaking any new merchant banking assignment, launching a new scheme, or entering into any new contract for 21 days, as applicable under SEBI regulations.
The action follows an inspection of Gretex Corporate Services Ltd for the period from April 1, 2021, to January 31, 2023, during which SEBI observed multiple compliance shortcomings.
In three separate rulings issued the same day, SEBI also imposed monetary penalties of Rs 5 lakh each on Ritu Agarwal, Shyam Sunder Vyas HUF, and Middleton Goods Pvt Ltd for executing “non-genuine trades” in the illiquid stock options segment of the Bombay Stock Exchange (BSE).
According to SEBI, these entities were involved in large-scale reversal of trades between April 2014 and September 2015, resulting in artificial volumes that distorted the market’s integrity.
The regulator reiterated its commitment to ensuring transparency and investor protection in the capital markets, emphasizing that lapses in due diligence or manipulative trading practices will continue to attract strict enforcement action.