SEBI Chair Tuhin Kanta Pandey Flags Use Of Preferential Allotments And Fake Disclosures For Financial Fraud
Pandey shed light on the misuse of preferential allotments and fake disclosures, collectively, to orchestrate financial frauds.
SEBI Chairperson Tuhin Kanta Pandey has flagged key red flags in financial frauds by listed companies, including diversion of shareholder funds, round-tripping through subsidiaries, circular transactions involving dummy entities, and misleading disclosures before the expiry of lock-in periods. The Chairperson was speaking at the ICAI Future Proof Forensics event of 2025.
He said SEBI relies heavily on forensic audits to uncover such irregularities.
Pandey shed light on the misuse of preferential allotments and fake disclosures, collectively, to orchestrate financial frauds. He said that such practices hurt retail investors. He cautioned that key managerial personnel, directors, and audit committees must avoid a tick-box compliance approach and instead adopt a deeper sense of responsibility and introspection.
He said SEBI has zero tolerance for financial fraud and is using a mix of regulatory and enforcement tools to detect and act against wrongdoing. The regulator is also focusing on improving investor awareness and strengthening internal capacity within the system.
He said related party transactions now require both audit committee and shareholder approvals, and minimum information standards have been set for these clearances. SEBI, along with stock exchanges, has also developed technology-based tools to generate fraud alerts and verify large business orders and contracts disclosed by companies.
Responding to questions about the frequency of contract expiries and investor concerns around market manipulation, Pandey said that the regulator's decision will not be a shock. It will be a co-creative and consultive process, he indicated.
Without naming specific cases, Pandey noted that SEBI continuously receives intelligence from multiple sources and shares relevant data with other enforcement agencies. He acknowledged that not all manipulations fall under SEBI’s jurisdiction but assured that efforts are ongoing to expand the regulator’s surveillance net.
He sidestepped queries about specific investigations, when asked about Jane Street entities, Viceroy report on Vedanta and IndusInd.
