Research Analyst Pritam Deuskar Slapped with Rs1 Lakh Penalty by SEBI for Audit Lapses

Moneylife Digital Team 12 February 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs1 lakh on Pritam Prabodh Deuskar, a registered research analyst (RA), for failing to comply with the regulatory requirement of conducting annual audits for FY21-22 and FY22-23.

In its order, SEBI's adjudicating officer, N Hariharan, stated, " Annual audit is an important activity which also helps to identify gaps or deficiencies, in any, in complying with the provisions of the RA Regulations, and ensures that research analysts are consistently following best practices related to disclosures and record-keeping. Timely audits also enable early detection and rectification of compliance issues, if any. Moreover, it strengthens investor confidence by demonstrating a commitment to ethical standards and regulatory accountability, which is essential in maintaining trust in the financial markets. Therefore, delay in conducting annual audit cannot be dismissed as a casual exercise."

"Mr Deuskar, being a registered RA, was under a statutory obligation to comply with the mandate of the RA Regulations in letter and spirit. His non-adherence clearly indicates a failure to diligently comply with these regulations," the SEBI order says.

SEBI found that Mr Deuskar had not adhered to the provisions of the SEBI Research Analysts Regulations, which mandate timely annual audits to ensure compliance.

Registered with SEBI as a research analyst since 9 November 2017, Mr Deuskar was subject to an inspection conducted by SEBI on 25 June 2024. The inspection took place at his registered office in Dhanori, Pune. However, he was not present at the given address and he later informed SEBI that he had relocated to Mumbai. Following this, SEBI directed him to submit the necessary documents for inspection.

After reviewing his operations from 1 April 2023 to 31 May 2024, SEBI identified non-compliance with RA Regulations. Specifically, it was found that Mr Deuskar had failed to conduct the required annual audits for FY21-22 and FY22-23 until SEBI explicitly requested the audit details. These audits are mandated under Regulation 25(3) and the Code of Conduct under Regulation 24(2) of the RA Regulations.

In response, Mr Deuskar admitted the delay in conducting the audits and cited personal reasons, including his mother's severe illness and hospitalisation. He provided supporting documents, such as hospital admission records and a death certificate, to substantiate his claim.

Despite acknowledging his personal hardships, SEBI noted that the requirement for annual audits for FY21-22 and FY22-23 predated July 2024. Therefore, his justification did not apply to the compliance failures for those years.

Prompted by SEBI, Mr Deuskar conducted and submitted the pending audit reports on 14 August 2024. While SEBI acknowledged that the audit for FY23-24 was conducted within the stipulated deadline, it determined that the previous non-compliance warranted regulatory action.

Considering the findings and Mr Deuskar remedial actions, SEBI imposed a penalty of Rs1 lakh.

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