SEBI seeks fresh investigation in 10–year old IPO scam


(Photo Courtesy: James)

Capital market regulator Securities and Exchange Board of India (SEBI) has said it will open fresh probe in a 10-year old IPO scam. The regulator said it has observed “inconsistencies” in its earlier order without elaborating further.

The issue is related to irregularities in IPO allotment process by opening fake demat accounts and cornering shares meant for retail individual investors. The person in question is Jayesh P Khandwala, proprietor of Zealous Trading Company, who is accused of employing unfair practices in the IPOs of IDFC, Sasken Communication Technologies and Suzlon Energy. In its earlier order, SEBI had found Khandwala guilty of providing finance to various operators to make applications in the retail category of these IPOs initial share sale programmes. Subsequently, thousands of fictitious demat accounts were opened. Upon allotment of shares in these IPOs the operators transferred these shares and corresponding refunds to Khandwala who in turn disposed of the said shares and made an unlawful gain.

The matter first came to light in 2005 and following an initial probe, SEBI ordered Khandwala to disgorge the unlawful gains of INR3.88 crore and interest of INR3.74 crore in August 2013. In his defense, Khandwala has said he and his firm is engaged in short term financing and trading of shares, securities and commodities as part of routine business. The matter subsequently reached to the Securities Appellate Tribunal (SAT) which remanded the matter back to SEBI twice. Now, the market regulator has said it will re-investigate the matter.

…It is appropriate that Sebi look into these objections/inconsistencies and relationships among various players in a fresh investigation

– Sebi Whole Time Member Prashant Saran


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