On 21 March, 2014, SEBI passed an order against Almondz Global Securities Limited (Almondz), along with its CEO and Managing Director and the authorised signatory of due-diligence certificate issued for PG Electroplast Limited's (PGEL) IPO. The order prevents the named entity and the persons from taking up any assignment or involvement in new issues of capital, buy-back of securities, open offers and delisting of securities for a period of 5 years, due to a number of non-disclosures and misstatements in the prospectus and red herring prospectus (RHP). The primary grounds were:

1) Non-disclosure that the funds raised by PGEL through ICDs were in the nature of a bridge loan: Almondz relied on the comfort letter issued by PGEL's statutory auditor. SEBI held that a comfort letter was a qualified and limited opinion, which was itself based on the information provided by PGEL, and the merchant banker could not be ignorant that funds raised by PGEL through ICDs were in the nature of a bridge loan.

2) Non-disclosure about the existence of loan committee and the decision of the board of PGEL to invest in ICDs of the other companies: SEBI held that though the ICDR Regulations and Li st ing agreement did not prescribe details of the disclosures of these, names of the committees taking material decisions of the company were required to be disclosed in the offer documents as material information according to Regulation 57(1) of ICDR Regulations. The merchant banker was obligated to pore through and scrutinise the complete minutes of the board meetings and that non-disclosures could have been avoided if reasonable due diligence was undertaken.

SEBI elaborated on a merchant banker's role in an IPO, stating that while it was obligated to the company to manage the IPO, it had an equal commitment towards the investor to present the company's information unambiguously in the offer documents. Further, SEBI emphasized the importance of the merchant banker's due diligence as not merely passively reporting client-provided information, but examining all relevant details to provide a t rue account in the prospectus and making an active effort to examine material developments, since investors make their investment decisions on the faith that due-diligence is done properly.