SEBI fines Rs.55 Lakh on Directors and Executives of Securekloud Technologies for False Financial Statement

The Securities and Exchange Board of India (SEBI) fined three directors and three executives, including two chief financial officers (CFOs) of Securekloud Technologies Ltd of Rs.55 lakh for submitting misleading disclosures, making false representations, and misrepresenting financial accounts.

According to Vijayant Kumar Verma, SEBI’s adjudicating officer (AO), in an order issued on January 20, 2023, “The violations proven in this case have plainly failed the regulatory goals of investor protection and market integrity. Given the noticees’ role and responsibility in these matters, as well as the requirements imposed by the regulations, I believe the default is grave, and the gravity of the situation cannot be overlooked. As a result, no liberal approach should be employed in this case, and the case merits the imposition of a monetary punishment equal to the default identified in this case.”

SEBI fined S Ravi Chandran, a full-time director of Rs.10 lakh and Dinesh Raja Punniamurthy, an independent director and member of Securekloud Technologies’ audit committee of Rs.20 lakh. The CFO, R Thyagrajan, received a Rs.10 lakh fine. At the same time, Babita Singaram, independent director and audit committee member, Swasti Bhowmick, former CFO, and G Sri Vignesh, company secretary and compliance officer, have been fined Rs.5 lakh each.

Deloitte Haskins and Sells (Deloitte) resigned as the company’s statutory auditor, citing multiple corporate governance concerns, including fraud due to irregularities and inconsistencies in financial statements and books of accounts. SEBI then launched an investigation into the alleged falsification in Securekloud Technologies’ books of accounts for four financial years, from FY16-17 to FY20-21.

Deloitte highlighted many abnormalities and inconsistencies in the company’s financial statements and books of accounts in its audit report for FY18-19, and stated that alleged offences, including fraud, had been committed at Securekloud Technologies.

On 13 September 2019, Deloitte submitted a complaint with the Ministry of Corporate Affairs (MCA) under Section 143(12) of the Companies Act, citing significant irregularities and inconsistencies in the company’s financial accounts. As a result, on November 15, 2019, it resigned as the company’s statutory auditors.

Securekloud Technologies then hired PKF Sridhar & Santhanam LLP (PKF) to conduct a forensic investigation of the company’s books and finances. SEBI requested that the corporation present Deloitte’s observations to the new auditor. However, the corporation did not disclose Deloitte’s findings with PKF. It informed SEBI that, due to PKF’s inability to finish the report within the time frame specified, it had disengaged its services at the meeting conducted on November 6, 2019. Securekloud Technologies told the regulator, in a delayed response on 13 July 2020, that it has hired KPSN & Associates LLP (KPSN) as its auditor.

Following the hearing, the SEBI AO states, “I note that the noticees’ violations include, among other things, non-disclosure, false disclosures, false representations, and misrepresentation in financial statements, all of which are major infractions in the securities market. Disclosures in the securities market are required to increase transparency and allow investors to make educated investment or disinvestment decisions “.

He then levied a total penalty of Rs.55 lakh on six people, including three Securekloud Technologies directors and three officials.