CONFIRMATORY ORDER IN RESPECT OF CAMEO CORPORATE SERVICES LIMITED[SAT Appeal No.:566/2019]

UNDER SECTIONS 11(4), 11B AND 11D OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 35 OF SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) REGULATIONS, 2008. IN RESPECT OF: Noticee No. Name of the Noticee CIN 1 Cameo Corporate Services Limited U67120TN1998PLC041613 1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) had passed an ex-parte ad-interim order in respect of Cameo Corporate Services Ltd (hereinafter referred to as “Cameo”/“Noticee”/“the RTA”), the Registrar to the Issue and Share Transfer Agent (SEBI Registration No. INR000003753) on October 18, 2019 (hereinafter referred to as “interim order”). Vide the interim order, the Noticee was prohibited from accepting fresh clients in respect of its activities, as defined under Regulation 2(g) and (f) of the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993, till further directions. In the interim order, the Noticee was called upon to file objections (if any) to the observations and directions given in the interim order, within 21 days from the date of receipt of the interim order by it. Accordingly, replies dated October 21 and 29, 2019 were filed by the Noticee. 2. In the interim order cum show cause notice the discrepancies/ deficiencies prima facie observed on the part of the RTA inter alia are mentioned below: a. Despite observing the mismatch in signature, the RTA has not done additional due diligence; b. The RTA has failed to detect that one entity, Dinesh Varu Kanvurjibhai has submitted multiple PAN in different combinations to process various requests; c. The RTA has failed to detect that photos in PAN/address proof submitted by different claimants/impostors are identical indicating that the documents are fake; d. The RTA has failed to detect that irrespective of the address/location of the original shareholders of certain of its client companies, the new address provided by the claimants for these shares were nearer to the address of these claimants;

e. The RTA has failed to detect that irrespective of address/location of the original shareholders of some of its client companies, Police Station in which the complaints regarding loss of share certificates had been lodged are same; f. The RTA has not done additional due diligence with respect to verification of PAN numbers from Income tax website or any other database despite the shares and dividend were in the nature of unclaimed; g. In one instance, the RTA has changed the address without obtaining the proof of address.

3. The interim order also granted the Noticee an opportunity of personal hearing on November 18, 2019 at SEBI Bhavan II, Bandra Kurla Complex, Mumbai. However, on requests received from the Noticee vide emails dated October 21 and 22, 2019, the hearing was rescheduled to October 31, 2019. The Noticee appeared before me through its Authorised Representatives and made submissions. The Noticee has also filed written submission through two letters dated October 21, 2019 and October 29, 2019.

4. The Noticee has raised various contentions regarding the observations in the interim order. The submissions of the Noticee in brief are as hereunder:

a. The client company did not handover the specimen signature of the entire past and present shareholders in respect of physical shares.

b. Wherever signatures were mismatching, the Noticee would reject the same and insist for bankers' attestation along with the address proof to process the request. However, in respect of folios where signatures were not available, the signature found in the Government issued identity cards or in the bankers' attestation would be relied upon, for effecting change of address, as the specimen signature was not recorded with the company/RTA.

c. Dinesh Varu Kanvurjibhai is having multiple PAN in different combination of his middle name/surname and had operated various Bank accounts and demat Accounts on the basis of the said PANs. There is no ground for rejection as he had a valid PAN. In the case of Shri Sewratan Mundra, the request was received from a person claiming to be Shri Sewratan Mundra, wherein the claimant had enclosed the self-attested copy of PAN along with the self-attested copy of electricity bill. The signature found on the PAN card copy was tallying with the signature on the request letter and hence the request was processed and the change of address was updated.

d. With respect to the cases where the claimants had requested for duplicate shares and had lodged them for transfer subsequently, the Noticee had obtained all the required documents, as prescribed by the relevant guidelines of SEBI for each request like duplicate, transfer etc. Regarding identical photos appearing in copy of documents submitted as Proof of Identity and Proof of Address for different claimants (with respect to request for duplicate certificates), these duplicate requests were received on different months and different years, hence it is humanly not possible to remember the photos from the PAN and other documents. Similarly, with regard to transferees having more than one PAN with different combinations of middle names and surnames, verifying the PAN of one transferee with that of the other transferee, especially across transfers of physical shares received in different periods was not possible.

e. As per the uniform norms for processing transfer guidelines issued by SEBI, it is required to obtain FIR or acknowledged copy of police complaint lodged by the shareholder regarding loss of share certificate. Accordingly the Noticee has obtained the same. There is no guideline to verify whether such police station exists or whether such complaint was actually lodged. Furthermore, these documents were processed during different periods by different teams. Hence it is not possible for the Noticee to remember the names of police station from where complaint was lodged by shareholders.

f. As per the SEBI circular no. MRD/DoP/Cir-05/2009 dated May 20, 2009 which was prevailing prior to LODR Regulations, 2015 and also as per Schedule VII A of SEBI LODR Regulations 2015, it is stated that the transferor and transferee shall furnish a copy of their PAN card to the listed entities and RTAs were advised to ensure the same. There is no regulation or guidelines that require RTA to verify the PAN with the website of the Income Tax Department.

5. Observations considering the submissions of the Noticee are as under: a. SEBI vide Clause 2 of Instructions to Registrars to an Issue / Share Transfer Agents dated October 11, 1994 has instructed the Share Transfer Agents to “maintain Specimen signature cards and transfer deeds”. SEBI has also mentioned under clause 1(c) of Schedule 1 of above mentioned instructions that “Transfer Agents shall process all transfer/transmission/transposition/change of address/other requests/complaints and generate checklist, verify the same and correction of such data”. Therefore, after the company had appointed the Noticee as the Share Transfer Agent, it was the obligation of the Noticee to obtain specimen signature and maintain the signature cards. Moreover, when the request for change of address was received, the first step in verifying any supporting document would be to compare the same with the original. I note that in some cases, request for change in address is accompanied by copy of the electricity bill / driving license, etc. On a preliminary examination of the same, it is noted that the said documents appear to be not genuine. Therefore, it appears that the Noticee has not carried out the due diligence of comparing the copies with the originals. In all cases except one (where signature was missing) there were signature mismatches. The fact that the cases were in relation to folios where dividend remained unclaimed, that itself should have made the Noticee more alert and the Noticee should have exercised additional due diligence. The Noticee has submitted that it has taken banker’s attestation in the cases where there were signature mismatches. On examination of such attestations, it appears that these purported attestations are taken from banks on a format issued by the Noticee. In certain cases, the format has not been filled adequately (absence of bank seal in few cases, type of account not mentioned, date missing etc.). However, such inadequate banker’s attestations have been accepted by the Noticee. On a preliminary query by SEBI, the issuing banks have confirmed that these attestations are not genuine. I find that this is a case of lack of due diligence on the part of the Noticee.

b. In the case of Shri Sewratan Mundra, it is noted that the PAN card submitted by the Noticee was found to be fake. This points to a lack of basic due diligence on the part of the Noticee since it could have detected the fake PAN if it had sought to verify the same with the original from the website of the Income Tax Department/ NSDL. Despite non availability of sample signature in this case, the RTA has not done additional due diligence and the shares got transferred to the transferee in 2015. This discrepancy could only be detected when a complaint was lodged in 2019 by a person claiming to be the legal heir of Shri Sewratan Mundra.

c. With regard to the common photograph on copies of multiple documents submitted by multiple claimants requesting for issue of duplicate share certificates, it is observed that the same could have been detected if the Noticee had verified the copies of the documents with the originals. The Noticee has stated that since these duplicate share requests and subsequent transfer request were received by it at different points in time, the Noticee was not able to identify the same. I note that the following modus-operandi was adopted by the claimants or transferees in all these cases: i. a request for change of address was sent by the claimants by providing a copy of PAN stating to be in the name of the original shareholder; ii. thereafter a request for issue of duplicate share certificates was made; iii. after receipt of the duplicate share certificates, the said shares were lodged for transfer in the name of the claimants; iv. then the claimants dematerialized these shares and sold these shares in the market. On a preliminary examination it was noted that aforesaid modus operandi was identified in nine instances pertaining to the same client company (Indo-National Limited) and five instances pertaining to other three client companies. The aforesaid modus operandi is not usual and therefore should have raised red flags in the Noticee’s system.

d. I note that on a prima facie reading of the document submitted by the claimants pertaining to loss of share certificates and issue of duplicate shares, the following is observed: i. The police stations where complaint in respect of the loss of share certificate was stated to be lodged are not located in the same area as the new address as well as the old address of the claimants; ii. in two instances, the stamp of the police station is not matching with the name of the police station mentioned therein; iii. the state/district/city which the police station belongs to is not mentioned in the purported seal of the police station. If the Noticee had carried out minimum due diligence exercise the glaring inconsistencies in the ‘certificates’ purported to be issued by police station regarding filing of complaint with respect to loss of share certificate, submitted by the claimants, could have been identified.

e. It is noted that Circular No. MRD/DoP/ Cir-05/2009 dated May 20, 2009, which has been referred to by the Noticee in its reply, made it mandatory for the transferee(s) to furnish copy of PAN card to the Company/RTAs for registration of such transfer of share (Clause 2) and the RTAs were to take necessary steps to implement the same. This circular has to be read in conjunction with circular No. MRD/DoP/Cir-05/2007 dated April 27, 2007 which stated that all intermediaries were to collect copies of PAN cards from their clients after verifying with the original (Clause 3.3). The purpose of the circular was that “PAN would be the identification number for all participants transacting in the securities market, irrespective of the amount of transaction.” Therefore, in this case the Noticee had to collect the copies of the PAN from the shareholders after verifying with the original. The said circular also directs the intermediaries to cross check the aforesaid details collected from their clients with the details on the website of the Income Tax Department/ NSDL. In this case, Noticee neither verified the copies with the original nor cross checked the same from the website. Therefore, there is a failure on the part of the Noticee to comply with the above-mentioned circulars.

f. I note that in the case of Shri Kanti Lalchand Ajmera, the Noticee has accepted the request for change of address without obtaining the proof of address.

g. SEBI circulars mainly provide for guidelines for minimum due diligence. However, where facts and circumstances warrants, RTA has to exercise additional due diligence, particularly in cases pertaining to inactive/dormant folios, unclaimed dividend, unclaimed shares, etc.

6. The present order has been passed under disciplinary proceedings against the RTA for the failure to exercise due diligence which is in violation of the Securities Laws, as mentioned in the order. SEBI cannot adjudge private disputes or claims or counter claims as held by Hon’ble Securities Appellate Tribunal, Mumbai in Ibrahim Ahmed Vs. SEBI (Appeal No. 40 of 2009), MCS Ltd Vs. SEBI (Appeal No. 107 of 2008) and Hameed Ullah Lalji alias Tony Ullah Vs. SEBI (Appeal No. 123 of 2008). The observations in this order does not ipso facto entitle any shareholder of the client company of the RTA to claim their securities, which claims are to be taken up by such shareholders before appropriate forum.

7. In view of the observations made in the paragraph 5 above, I do not find that Noticee has made out a case for revocation of the directions issued vide the interim order. In view of the above, I, in exercise of the power conferred upon me under Sections 11(4), 11B and 11D read with Section 19 of the Securities and Exchange Board of India Act, 1992, in the facts and circumstance of case, hereby, issue the following directions: a. confirm the directions issued against the Noticee in the interim order dated October 18, 2019; b. order SEBI to carry out a special purpose inspection of the Noticee inter alia to inspect the books of accounts of the Noticee including but not limited to the due diligence adopted by the Noticee in respect of unclaimed shares, the procedure being followed for issue of duplicate shares, the steps taken by the Noticee with regard to the rectification of the register of members pertaining to wrong transfer of shares etc. The Special purpose inspection is to be conducted by SEBI and a report to be submitted within ninety days from the date of this order. The interim order as mentioned in para 6 a. above shall continue till the expiry of ninety days form the date of this order.

8. This order shall come into force with immediate effect.

9. A copy of this order shall also be sent to all the recognised stock exchanges, depositories and Registrar and Transfer Agents to ensure compliance with the above directions.

-Sd- Place: Mumbai ANANTA BARUA Date: November 07, 2019 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA