SAT Rules Compliance Officers Not Liable For Corporate Fraud By Promoters

The Securities Appellate Tribunal (SAT) ruled that compliance officers of listed companies cannot be held liable for fraud committed by Promoters or Directors.

This ruling arose from the case of V. Shankar, former Company Secretary of Deccan Chronicle Holdings, who was fined Rs 10 lakh by SEBI for signing a buyback announcement based on misstated financial statements.

SAT stated that compliance officers have a ministerial role and are not responsible for verifying audited accounts approved by the Board. The tribunal set aside the penalty, emphasising that compliance officers cannot be expected to re-examine certified accounts. Legal experts noted the ruling clarifies that compliance officers cannot be held liable solely for signing documents or disclosures under SEBI rules, preventing undue regulatory actions against them. The judgement also highlights the need to clearly define the roles and responsibilities of key managerial personnel under corporate law. This decision is expected to provide relief to compliance officers across listed entities in India.