SEBI bars leading market operators in IPO scam

In a major move, SEBI has passed interim, ex parte orders against a host of stock broking companies, depository participants including major banks and private stock market financiers for their alleged involvement in the IPO scam.

The order bars 24 operators, including leading stock broking company IndiaBulls Securities and Roopalben Panchal who was named in last year's SEBI order, from directly or indirectly dealing in the securities markets, including IPO's, till further directions.

Retail investors can trade, however, through banned brokers.

SEBI said its investigation revealed that some of the operators were involved in off-market transactions with financiers, indicating that they might have been acting as intermediaries for these financiers. Hence 85 financiers, mostly individuals and some private companies including Karvy Stock Broking, have also been barred from dealing in the securities markets.

SEBI has clarified that stock broking companies like IndiaBulls and Karvy Stock Broking have been prevented only from trading in their own accounts. They are free to trade on behalf of their customers.

Next on SEBI's firing line are 12 depository participants (DPs) who allowed the operators and their financiers to open multiple accounts. These 12 DP's, including banks like HDFC Bank, Centurion Bank of Punjab, IDBI Bank and ING Vysya besides leading broking houses like Motilal Oswal and IL&FS, have been instructed not to open any new demat accounts.

The order is very severe on the Karvy group and Karvy DP has been termed as "unfit to deal in the securities market as a SEBI-registered intermediary." Karvy DP and another private depository participant Pratik DP have been barred from carrying on any activities of a DP.

Other Karvy group companies like Karvy Computershare, Karvy Investor Services and Karvy Consultants have been ordered not to take fresh business as registrars and transfer agents as these companies "have appeared to have acted in concert in the gamut if IPO manipulation."

The order also lists another set of 15 DP's, including ICICI Bank, Citibank, UTI Bank, Kotak Mahindra, Standard Chartered and BNP Paribas, who are found to have allowed multiple demat accounts with the same addresses. SEBI has asked NSDL to conduct an inspection of these DP's and submit a report.

The IPO scam was unearthed by SEBI last year after an investigation into large off-market transactions, which revealed cornering of shares reserved for retail investors during the IPOs of YES Bank and IDFC. Last year itself, SEBI had barred a group of individuals and private companies from the IPO process.

The order was passed by G Anantharaman, whole time member of SEBI, after a detailed investigation into a large number of IPO's between 2003 and 2005. The companies and individuals mentioned in the order have 15 days to respond and the final order would be passed subsequently.