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SEBI bars Anil Ambani from dealing in Securities Markets on allegations of money laundering

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The Securities and Exchange Board of India (SEBI) has barred Anil Ambani and three others from dealing in the Securities Market, after charges of diverting funds from the Reliance Home Finance Limited (RHFL) to other companies for debt payment.

The capital market regulator found that the persons holding key managerial positions in the company were prima facie hand-in-glove with Ambani in siphoning off borrowed funds of the company to other financially weak promoter group companies.

Apart from being barred from the securities market, Ambani and others have been restrained from associating themselves with any intermediary registered with SEBI, any listed public company or acting as directors/promoters of any public company, which intends to raise money from the public, till further orders.

SEBI was acting on certain complaints alleging siphoning off and diversion of funds of RHFL by promoters and management of the company. Further, the regulator received multiple Fraud Monitoring Returns from banks, alleging that funds borrowed by RHFL from different lenders were partly used towards repayment of loans.

It was also alleged that various connected parties and companies with weak financials were used as conduits to siphon off funds from RHFL to entities connected to the promoter company, Reliance Capital Limited.

Another source of the complaint was auditing house Pricewaterhouse Coopers (PwC) intimating its resignation as the statutory auditor of RHFL, citing various grounds. PwC had claimed that the company did not give substantive/satisfactory responses to the queries raised by them during the audit and that it even threatened the auditor with legal proceedings.

After going through the complaints and conducting an investigation of the company for the financial 2018-19, SEBI found, “Looking at the conduct and propensity of the Company to indulge in such activities of diversion of funds and misrepresentation of books of accounts, falsification of financial statements resulting into non-disclosure of true & fair information to the public at large, and also considering the collective misconduct exhibited by the Key Managerial Persons of the Company, there is an urgent need that the Company should be prevented from pursuing such despicable activities, which are visibly in violation of securities laws…”

Ambani and other noticees have been asked to showcause as to why inquiry should not be held against them in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 and why penalty should not be not imposed on them under various provisions of the SEBI Act.

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