A year ago, in the wake of the Satyam scandal, a Noble group financial subsidiary came up with three evocative definitions for the tricks that Indian promoters play on their shareholders.

The classic, ‘pump & dump’ trick where share prices are pumped up through positive news leaks to the media and dumped when enough of retail suckers enter the fray. Another is the ‘blab & grab’ trick where companies venture into hot, but unrelated, areas, raise funds and then drop the plan and keep the money.

And, finally, there is ‘expense manipulation’ to pull out cash from the company by padding up expenses and lending to private entities of the promoter. A year later, the White Paper by Allen & Gopinath shows that the tricks continue. It asks SEBI to bar the issue of preferential equity warrants at a discount to promoters to curb insider trading and unfairness to retail investors. On related party transactions that permit expense manipulation, it says, “India has a weak regime governing related party transactions.  This has negative consequences to public shareholders and allows companies to spin off valuable assets from listed entities to unlisted private entities owned by the promoters; to spin off group company investments at a discount to a holding company and allows assets to be purchased from companies owned by the promoters.” The fact that even blue-chip companies are reluctant to conduct polls on major resolutions hurts non-promoter interest even further.