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Sebi nets Rs 3.5 cr through IPO scam consent orders

The Securities and Exchange Board of India (Sebi) has so far collected over Rs 3.5 crore through consent orders passed in the initial public offer (IPO) share allotment scam of 2006.

Sebi wholetime members T C Nair and M S Sahoo passed the 26th such consent order on October 31, asking Bansilal Mehta and Chimanlal Shah to remit Rs 4.26 lakh. Mehta and Shah “were alleged financiers to key operators for cornering shares in the IPO of IDFC”, the order said. The regulator had earlier prohibited them from buying, selling and dealing in securities. So far, the regulator has settled 128 cases through consent orders.

A consent order is a system of settling disputes in capital markets through an agreement between a regulator and an accused through a penalty or a fine. Earlier this month, Sebi had asked one of the alleged financiers and key operators in the IPO scam, Kelan Atulbhai Doshi, to pay the disgorgement amount of Rs 2.5 crore in addition to Rs 5 lakh as settlement charges.

This was also the highest penalty that Sebi has ever asked anyone to pay up among the IPO scam consent orders. Sebi had signed the first set of consent orders in June with members of the Dadia family, who were identified as errant financiers in the IPO scam.

The amount collected gets deposited into the Consolidated Fund of India and does not get ploughed back to the capital market. Entities that request for a consent order have to furnish a written waiver, assuring not to take any legal proceedings against Sebi concerning any of the issues covered by the consent order. The recent past has been witness to a few instances where the Sebi order has been turned down by the Securities Appellate Tribunal (SAT).

The IPO share allotment scam goes back to 2006, when Sebi had barred various individuals and entities from dealing in the securities market directly or indirectly until further directions. A Sebi-mandated committee headed by Justice Wadhwa, appointed to work out the modalities of compensating investors who were cheated in the IPO scam, had suggested that they be compensated by monetary terms. It had worked out a compensation of Rs 92 crore for the investors, who had applied for shares in the retail category in many IPOs, which were allegedly manipulated by the scamsters.

The money was to be collected partly by selling the frozen shares of the entities implicated in the scam, an amount estimated to be between Rs 60 crore and Rs 90 crore. The implicated individuals and entities are Roopalben Panchal, Karvy Stock Broking, Magnum Equity Services, Deep Stockbroking, Anagram Securities, Jhaveri Securities and Indiabulls Securities, among others.

Further, entities like HDFC Bank, IDBI Bank, Centurion Bank of Punjab, Motilal Oswal Securities and Jhaveri Securities were barred from opening fresh demat accounts for failing to adhere to Know-Your-Client (KYC) norms.

Source: Business Standard


  1. Consent Orders said...

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