Failure To Disclose Acquisitions: SEBI Imposes Penalty On Advik Capital Ltd's Promoter-Directors

SEBI highlighted that the noticees acquired a significant stake in Advik Capital between October 2021 and April 2022 which required mandatory disclosure obligations under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations). These regulations mandate that any acquisition of shares aggregating to five percent or more of a target company's total shares necessitates timely disclosure to stock exchanges.

The investigation revealed delays ranging from 44 to 234 days in the noticees' disclosures which significantly breached the stipulated two-day timeframe. Seema Garg's sale of 2.03% shares in February 2022 also failed to meet disclosure deadlines, resulting in a 107-day delay.

The noticees argued that they made a public announcement of their intention to acquire shares on May 18, 2022 which complied with certain regulations but omitting disclosures required under different clauses of SAST Regulations. However, SEBI held that these submissions lacked merit and emphasised the critical importance of timely and comprehensive disclosures in ensuring market transparency and protecting investor interests.

SEBI referred to the decision of the Securities Appellate Tribunal (SAT) in the case of Coimbatore Flavors & Fragrances Ltd. vs. SEBI (Appeal No. 209 of 2014) and held that disclosures are crucial for market transparency and investor protection. The SAT's decision held that accurate and timely disclosures enable informed decision-making among investors and facilitate effective regulatory oversight in the capital markets.

SEBI also referred to Virendrakumar Jayantilal Patel vs. SEBI (Appeal No. 299 of 2014), where the SAT reiterated the mandatory nature of disclosure timelines. It held that any delay or omission in complying with disclosure requirements could undermine market integrity and investor confidence.

SEBI referred to Section 15A(b) of the SEBI Act, which pertains to penalties for failure to furnish information within specified timelines. Despite acknowledging the absence of quantifiable figures on gain or loss, SEBI justified the penalties of Rs 4 lakh on Vikas Garg and Rs 3 lakh each on Seema Garg and Sukriti Garg. Additionally, all three were jointly penalized Rs 3 lakh.

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