Fictitious public issue applicants may get jail term
The standing committee on finance has recommended these measures in its report on the IPO scam.
By TNN |
NEW DELHI: The government may make multiple applications for public offers punishable under the Companies Act and fictitious applications may be punishable with 5 years imprisonment, reports Our Bureau in New Delhi.
The standing committee on finance has recommended these measures in its report on the IPO scam. The panel has taken a bleak view on the way the different regulatory bodies have handled the scam. It has also endorsed a Sebi proposal to revamp the management of the two depositories , NSDL and CDSL.
The report ‘Efficacy of reform process in the capital market-recent IPO scam’ says, “The Companies Act must be amended to make the submission of multiple applications, an offence.” The report tabled in Parliament on Tuesday has also asked the government to speed up the pace of market reforms, “to deal with such scams in future.”
Currently, multiple applications from the same person in a public offer, only runs the risk of being rejected. But after tracking the way the IPO scam broke out and taking depositions from different agencies, the committee, headed by BC Khanduri, says this is not enough. It said these amendments must be part of the exercise for a comprehensive revision of Companies Act that the ministry of company affairs has undertaken.
In the IPO scam, stock market regulator Sebi found a number of instances where a single individual had cornered shares by making multiple applications. This had especially happened in the case of public offers made by IDFC and Yesbank.
The committee has claimed this happened because the two depositories “have fared poorly in conducting their inspections of depository participants registered with them.” It points to the Sebi observation that there was a recurrence of the same errors by the depository participants, every year. But despite noticing them, NSDL took no action against them. The Parliamentary committee has therefore recommended a system of concurrent audit.
At present, any person wishing to transact in shares has to open a demat account with either of the depositories. The applications are routed through a network of depository participants.
The committee has also directed the Central Board of Direct Taxes to select all the returns of the entities involved in the Sebi investigation, for scrutiny.
The standing committee on finance has recommended these measures in its report on the IPO scam. The panel has taken a bleak view on the way the different regulatory bodies have handled the scam. It has also endorsed a Sebi proposal to revamp the management of the two depositories , NSDL and CDSL.
The report ‘Efficacy of reform process in the capital market-recent IPO scam’ says, “The Companies Act must be amended to make the submission of multiple applications, an offence.” The report tabled in Parliament on Tuesday has also asked the government to speed up the pace of market reforms, “to deal with such scams in future.”
Currently, multiple applications from the same person in a public offer, only runs the risk of being rejected. But after tracking the way the IPO scam broke out and taking depositions from different agencies, the committee, headed by BC Khanduri, says this is not enough. It said these amendments must be part of the exercise for a comprehensive revision of Companies Act that the ministry of company affairs has undertaken.
In the IPO scam, stock market regulator Sebi found a number of instances where a single individual had cornered shares by making multiple applications. This had especially happened in the case of public offers made by IDFC and Yesbank.
The committee has claimed this happened because the two depositories “have fared poorly in conducting their inspections of depository participants registered with them.” It points to the Sebi observation that there was a recurrence of the same errors by the depository participants, every year. But despite noticing them, NSDL took no action against them. The Parliamentary committee has therefore recommended a system of concurrent audit.
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At present, any person wishing to transact in shares has to open a demat account with either of the depositories. The applications are routed through a network of depository participants.
The committee has also directed the Central Board of Direct Taxes to select all the returns of the entities involved in the Sebi investigation, for scrutiny.
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