SEBI Bars SecUR Credentials And Rahul Belwalkar From Securities Market Amidst Allegations Of Fund Mismanagement

SecUR Credentials, originally listed on NSE Emerge and subsequently migrated to the mainboard of both National Stock Exchange and Bombay Stock Exchange in October 2022, has faced severe scrutiny following allegations of financial irregularities. SEBI's investigation held that Rahul Belwalkar, the Managing Director, was involved in several financial transactions that raised concerns about fund diversions to various entities, including the company's promoters and directors.

The regulatory action came in the wake of findings that suggest significant lapses in financial governance at SecUR Credentials. According to SEBI's interim order, Belwalkar has been prohibited from engaging in any securities market activities until further notice. Moreover, he has been barred from holding any directorial positions in listed companies.

SEBI held that there was a lack of segregation between SecUR's and Belwalkar's bank accounts. The transfers allegedly involved substantial sums being moved to entities associated with the company's management, without adequate disclosure or justification provided by SecUR or Belwalkar. SEBI held that this lack of segregation between corporate and personal accounts violated the Securities and Exchange Board of India (SEBI) Act, which mandates strict separation of funds to prevent misuse and ensure transparency in financial transactions (SEBI Act, Section 11 and Section 19).

Further, SEBI highlighted instances where financial disclosures were found to be inaccurate or misleading, in relation to revenue recognition practices and related party transactions. SEBI held that such non-disclosures contravene the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, which states that listed entities must provide transparent and comprehensive disclosures to ensure informed decision-making by investors (LODR Regulations, Regulation 4 and Regulation 30).

Additionally, SEBI found discrepancies in SecUR's financial statements, concerning revenue recognition practices related to transactions with entities like Varanium Cloud. The order held that these practices resulted in misleading financial reporting, a violation of the Indian Accounting Standards (Ind AS), which require adherence to internationally accepted accounting principles to maintain the accuracy and reliability of financial statements (Ind AS 18).

The interim order also highlighted governance failures at SecUR Credentials, including the appointment of Rahul Belwalkar as both Managing Director and de facto Compliance Officer without requisite regulatory approvals. This violated SEBI's corporate governance norms outlined in the LODR Regulations, which mandate independent oversight to prevent conflicts of interest and ensure robust corporate governance practices (LODR Regulations, Regulation 6).

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