Motilal Oswal settles scam case with SEBI for Rs5 lakh
12 May 2010
The Securities and Exchange Board of India has disposed of a case against brokerage firm Motilal Oswal in connection with an IPO (initial public offering) scam after the company agreed to pay Rs5 lakh as settlement charges.
The stock market regulator, through a consent order, has asked Motilal Oswal Securities Ltd (MOSL) to pay the for not exercising due diligence while opening demat accounts.
The case is related to IPO irregularities unearthed by the market regulator during 2003-2005, when thousand of fictitious demat accounts were opened to corner shares reserved for retail investors in a public issue.
Sebi's investigation found that MOSL failed to exercise due diligence and did not adhere to the 'know your customer' (KYC) norms while opening 697 demat accounts with common addresses.
Pursuant to its investigation, the enquiry officer recommended that the certificate of registration granted to the entity as depository participant of CDSL be suspended for a period of seven days, and called up to show cause why monetary penalty should not be imposed.
"The consent order disposes the pending enquiry proceedings against the applicant (Motilal Oswal) in the matter of IPO irregularities during 2003-05," SEBI said in its order.