Our Bureau

Mumbai, Dec. 15

THE capital market regulator, SEBI, has unearthed a large-scale multiple application case in the recent YES Bank IPO and banned 13 investors from trading in the bank's shares with immediate effect.

These investors have manipulated allotment of shares by opening more than 7,500 `benami' depository accounts. They gained Rs 1.7 crore by this manipulation on the first trading day of the IPO, according to a SEBI interim order issued today.

SEBI has also referred the case to the Reserve Bank of India seeking investigation into the role of the Chennai-based Bharat Overseas Bank Ltd and Vijaya Bank in opening the bank accounts of these benami entities and funding their IPO applications.

The modus operandiAccording to SEBI report, an investor named Ms Roopalben Panchal had applied for 1,050 YES Bank shares and paid the application money of Rs 47,250. Apparently she did not receive any allotment.

Later she received 150 shares each from 6,315 allottees through off-market transfer. Thus, she received 9,47,250 shares in aggregate, which she sold through five other entities on the day of listing.

Another investor, Sugandh Estates and Investments P Ltd, also received a large number of shares by similar method of manipulation and gained about Rs 32 lakh through opening 1,315 benami accounts.

Investigation by SEBI has found depository participant, Karvy-DP, which was used by these companies to open 7,630 benami dematerialised accounts (which served as a conduit for two entities) failing in the `know your client' norms in the issue.

SEBI has asked NSDL to undertake comprehensive inspection of Karvy-DP to check whether it has implemented the `know your client' norms that DPs are required to follow.

Further probe neededSEBI said: "Further probe is required for examining the systemic fault, if any, of the registrar to the issue - Karvy Computer Shares Pvt Ltd - and the lead mangers, DSP Merrill Lynch Ltd. And Enam Financial Consultants in identifying and the weeding out the benami applications."

NSDL and Central Depository Services Ltd have also been advised by SEBI to enhance their surveillance and devise and put in place systems and procedures for identifying multiple dematerialised accounts of suspicious nature.

Both the depositories have also been asked to report their findings to SEBI "as expeditiously as possible," according to SEBI order by its whole-time member, Mr G. Anantharaman.

The 13 entities and individuals barred from further dealings in YES Bank and future IPOs are Ms Roopalben Nareshbhai Panchal, Ms Devangi Dipakbhai Panchal, Seer Finlease (P) Ltd, Excell Multitech Ltd, Zenet Software Ltd, Tauras Infosys Ltd, Mr Rajan Vasudev Dapki, Barghav Panchal (HUF), Mr Jayantilal Jitmal, Sugandh Estates and Investments Pvt Ltd, Sujal Leasing, Ms Ritaben R. Thakkar, and Mr Veenben Y. Thakkar.

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(This article was published in the Business Line print edition dated December 16, 2005)
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