SEBI Fines Swaraj Shares & Securities ₹10 Lakh over Due Diligence Lapses in IPOs and Open Offers
Capital markets regulator Securities and Exchange Board of India (SEBI) has penalised Swaraj Shares & Securities Private Limited ₹10 lakh following an examination that revealed lapses in due diligence during open offers and initial public offerings (IPOs), alongside non-compliance with insider trading regulations.
The adjudicating officer held that the merchant banker failed to demonstrate the necessary care, thoroughness, and independent professional judgment mandated for registered intermediaries handling sensitive public transaction documents and regulatory filings.
Findings of the SEBI Inspection
The penalty stems from an inspection carried out by SEBI officials between July 9 and July 11, 2025, which reviewed transactions and filings handled by Swaraj Shares & Securities during the period spanning April 1, 2022, to March 31, 2025.
The regulatory inspection reviewed several capital market mandates managed by the merchant banker, including:
Key Transactions Under Scrutiny:
- G. D. Trading and Agencies Ltd (now RRP Semiconductors Ltd): Deficiencies were assessed in relation to open offer obligations triggered by substantial acquisition agreements, including the handling of historical disclosure mandates and restraint orders issued by stock exchanges.
- Shoora Designs Ltd: Due diligence processes and offer documentation verification during its SME public issue.
- Micropro Software Solutions Ltd: Compliance processes, prospectus disclosures, and independent verification procedures surrounding its public offering.
Beyond public issue documents, SEBI probed the merchant banker's compliance framework under the SEBI (Prohibition of Insider Trading) Regulations. The regulator found inadequacies in the firm's maintenance of the Structured Digital Database (SDD) and associated internal checks designed to track and safeguard Unpublished Price-Sensitive Information (UPSI).
History of Regulatory Scrutiny
This is not the first regulatory intervention faced by the intermediary. In August 2025, SEBI had suspended the Certificate of Registration of Swaraj Shares & Securities for three months following an inquiry into multiple operational breaches. In that proceeding, SEBI noted failures in due diligence across draft letters of offer (including issues involving Sheetal Diamonds Ltd and Richrich Inventures Ltd), deficient investor grievance mechanisms, and the submission of fabricated board meeting records where documented attendees were verified to have been physically absent or engaged elsewhere.
At the time, the regulator emphasised that merchant bankers cannot merely rely on self-certified documents provided by company promoters without conducting independent verification.
Impact on the Indian Primary Market
The adjudication order against Swaraj Shares & Securities serves as a stern reminder of the statutory obligations placed on merchant bankers. Lead managers act as critical gatekeepers to the Indian capital markets, particularly in the fast-expanding SME IPO segment where retail participation has grown significantly.
By penalising intermediaries for procedural and due diligence lapses, SEBI continues to signal that shortcuts in prospectus verification, incomplete disclosures, and weak internal controls over market-sensitive data will attract regulatory sanctions to preserve investor trust in primary market offerings.
