Sucheta Dalal :SEBI panel for recovering gains made by IPO scamsters
Sucheta Dalal

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SEBI panel for recovering gains made by IPO scamsters  

December 29, 2009

Scamsters gained Rs 95.69 crore by rigging initial public offerings (IPOs) between 2003 and 2005, a regulatory panel has found. It has suggested recovering this amount and distributing it among affected investors.


The value of frozen shares of these scamsters in the depositories worked out to be Rs147.85 crore and the balance in their bank accounts frozen by the Central Bureau of Investigation (CBI) stands at Rs1.20 crore as on 31 October 2007, the Justice Wadhwa Committee said.


The committee, set up by market regulator Securities and Exchange Board of India (SEBI) to investigate irregularities in IPOs floated during 2003-2005, suggested the possibility of recovering this amount and distributing it among the deprived applicants.


"The quantum of unjust gains based on allotment to accounts is approximately Rs95.69 crore. The value of the holdings in the frozen demat accounts in both National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) of the key operators and financiers as on 31 October 2007 works out to be about Rs17.85 crore. The balance in the bank accounts of operators/financiers frozen by CBI is Rs1.20 crore," said the report.


The scam in 21 IPOs, including Jet Airways, NTPC, IDFC, TCS, Yes Bank, Gokaldas Exports, ILFS Investsmart, Suzlon Energy and Shopper’s Stop, related to alleged cornering of the shares reserved for retail investors by scamsters through opening of fictitious accounts.


For the purpose of payment to the deprived retail applicants, the amount which is the difference of closing price of shares on the first day of listing/trading at NSE and the IPO issue price will be considered, said the committee.


"These applicants will not be entitled for the market price movements subsequent to the listing," said the report of the committee, headed by former Supreme Court Judge DP Wadhwa.


The committee recommended that those who did not get any shares should be reallocated money equally from the recovered amount, till they each receive the gains from minimum shares allotted to the lowest category in the IPO.


“Once that number is reached, any left-over money shall spill over" and reallocated to the partly successful applicants, the committee said.


Former finance minister P Chidambaram had assured the Lok Sabha that steps would be taken to reallocate shares to persons who had lost out on allocation of shares on account of the IPO scam.

Yogesh Sapkale


-- Sucheta Dalal