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Indian regulators bar investors in share scheme
Indian Finance Minister Palaniappan Chidambaram yesterday promised to take severe but unspecified action against those involved in a scheme of new-share allotments last year.
- Reuters
- Published: 00:00 January 14, 2006
New Delhi/Mumbai: Indian Finance Minister Palaniappan Chidambaram yesterday promised to take severe but unspecified action against those involved in a scheme of new-share allotments last year.
The market regulator has banned four investors from dealing in securities and 35 others from trading in future initial public offerings (IPOs), accusing them of using false identities and bank accounts to secure more shares in the IPO of Infrastructure Development Finance Co Ltd last year.
Fictitious names
The sanctions stem from a broad investigation into IPO allotments after the regulator detected irregularities last month in the buying of shares of YES Bank for its 2005 IPO.
In both cases, the Securities and Exchange Board of India (SEBI) found that some investors had used fictitious names to buy more shares than they would have received otherwise, and some of the accused in the YES Bank case were also named in the IDFC matter.
"It is the same set of players and four or five individuals, couple of banks are the same. The depository participants are the same. Therefore the culprits are pretty much identified," Chidambaram told reporters in New Delhi.
"But now that we know who the culprits are ... I think all agencies, acting together, will take the severest action against them," he said, without offering specifics.
SEBI said IDFC share allotments of nearly 44,000 applicants had been been transferred to just four entities before the shares were even listed indicating the applicants were fictitious.
"The entire gamut of elaborate game-plan of queering the pitch in the market is driven by base cupidity to wangle a patently unfair gain," SEBI said in its order, issued late on Thursday.
Chidambaram said the misuse was the result of a systemic deficiency, adding "something is wrong with the person who designed the system or the software."
Corrective steps
"I think corrective steps are being put in place, but we will take action against those individuals, all those who collaborated with them, in the distortion of the IDFC issue and the YES Bank issue."
For the IDFC IPO, the regulator referred Bharat Overseas Bank Ltd, Vijaya Bank Ltd, HDFC Bank Ltd, Indian Overseas Bank Ltd and ING Vysya Bank to the Reserve Bank of India to examine their role in opening accounts for the entities and funding the share purchases.
Sebi has also ordered the inspection of Karvy Computershare Ltd, the registrar to the IDFC issue, and merchant bankers Kotak Mahindra Capital Co, DSP Merrill Lynch Ltd and SBI Capital Markets Ltd to ascertain reasons for any systemic failure.
Vijaya Bank said it would co-operate with any investigation, and all the other banks offered no comment or were not reachable.
AFP
Pre-budget meeting
Palaniappan Chidambaram held a pre-budget meeting with economists ahead of the presentation of the Union Budget for 2006-07.
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