Quick Summary
Compliance officer not liable for fraudulent accounts unless proven that he was Party V. Shankar vs. SEBI Order by the Securities Appellate Tribunal, Mumbai Bench, May 5, 2025 The Securities Appellate Tribunal (SAT), Mumbai bench, on May 5, 2025, delivered a significant order in the case of V. Sha
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FAQ :
A Compliance Officer is generally not liable for promoter fraud unless it can be proven that they were directly involved in the fraudulent activities or had knowledge of them.
The main issue was whether V. Shankar, as Company Secretary and Compliance Officer, could be held liable for alleged misstatements and non-compliance in a share buyback offer document he authenticated.
The SAT ruled in favour of V. Shankar, setting aside the penalty imposed by SEBI. They stated that the Compliance Officer's role is primarily to authenticate documents after Board approval, not to verify the substantive accuracy of financial information.
Authentication is a procedural duty following Board approval, while verification of substantive financial accuracy is primarily the responsibility of the company's Board, management, and auditors.
Yes, a Compliance Officer is generally entitled to rely on the due diligence performed by other competent bodies such as the Board of Directors, statutory auditors, and management, unless there is evidence of direct involvement in wrongdoing.
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