New Delhi, Oct. 3 -- The Securities and Exchange Board of India (SEBI) dealt with a mix of investor protection measures and enforcement actions this week, ranging from new UPI validation tools to an old chit-fund operator resurfacing, and a pipe manufacturer's failed legal stretch.

Here's a quick recap

New investor safeguard

The capital markets regulator announced a significant investor protection measure in the form of validated UPI handles for SEBI-registered intermediaries.

It also launched a new webpage, SEBI Check, to allow investors to check if a bank account truly belongs to a registered entity before making a transaction.

The validated UPI handles will carry @valid suffix and identifiers such as .brk for brokers and .mf for mutual funds. For example, a validated UPI handle for a broker would read abc.brk@validhdfc, while a mutual fund's could be xyz.mf@validicici, where HDFC and ICICI are self-certified syndicate banks.

Regulatory orders show that investors are often duped by fraudsters posing as registered portfolio managers, advisors, or fund operators. When SEBI attempts to seize illegal gains, it often encounters mule accounts and non-existent addresses.

With these verified UPI handles and bank accounts, investors will now be able to ensure their money is directed to traceable, regulated entities.

Old scammer, new tricks

Among this week's odd cases was that of PPS Sethi, the former head of Basil International, who had been arrested by the CBI in 2016 for running a Rs 3,500 crore chit-fund scam.

In a September 30 order, SEBI asked Sethi and his company Milani Techno Engineering to refund Rs 4.12 crore raised through a public issue of redeemable cumulative preference shares (RCPS) without following due norms.

SEBI had received complaints from 127 investors who were issued 14,143 RCPS in FY12. However, the actual number of victims and funds raised could be higher, SEBI said.

Interestingly, most directors of the company, except Sethi, claimed they didn't know they were directors of Milano. Several said they were employees of companies headed by Sethi and were either forced to sign documents or had their signatures forged. Some had even filed FIRs, with one, Ram Vishal Telars, saying he only discovered in a single day that he had been named a director in several companies.

Stretching definitions

In another case, SEBI examined whether MAN Industries (India) Ltd (MIIL) could classify itself as providing infrastructural facilities to claim an exemption under Section 186 of the Companies Act, which restricts how companies can extend loans.

SEBI clarified that the exemption applies only to companies providing infrastructural facilities, not to suppliers of components or materials.

Its probe also found MIIL guilty of misrepresenting financials, failing to consolidate financial results of subsidiaries, transacting with related parties without adequate disclosures and approvals, and not recognizing interest income from loans given to its subsidiary Merino Shelters Pvt Ltd. On not recognizing the interest income, the company and its senior management had said these transactions are exempt under Section 186 of the Companies Act.

SEBI banned MIIL and its directors from the securities market for two years and imposed a total fine of Rs 1 crore for multiple violations.

Published by HT Digital Content Services with permission from VC Circle.