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Ravi Ranjan Prasad

Mumbai, Dec. 31 SEBI has barred 14 entities of the Bhansali Group from buying and selling of securities for three years for alleged irregular trading in the shares of Nissan Copper, immediately after its IPO listing on December 29, 2006.

SEBI, a the preliminary examination vide order dated January 17, 2007, directed the BSE to withhold the profit made by 19 parties in an unfair manner. Accordingly, BSE withheld over Rs 41.61 lakh in an escrow account.

SEBI’s case was that the parties made 426 applications, each up to Rs 1 lakh, by using different combinations of first, last and middle names, different addresses and wrong PAN numbers.

The parties defended their action on the ground that multiple applications are not prohibited.

However, the Whole-Time Member observed in his order that SEBI (DIP) Guidelines prohibit multiple applications for shares for an aggregate value in excess of Rs 1 lakh in retail segment of an IPO.

The parties allegedly made multiple applications for an aggregate value in excess of Rs 1 lakh with the full knowledge of prohibition.

Also, the parties reportedly used dubious means to avoid detection in multiple applications while ensuring allotment of shares to their groups in the IPO of Nissan Copper, to the detriment of the retail investors.

Accordingly, they were found guilty under regulation 3 (a) and (c) of the SEBI FUTP Regulation, 2003.

Having regard to the gravity of the nature of the transaction, the Whole-Time Member restrained 14 of the entities for three years while choosing not to pass any directions against five, who were minors at the time of commission of the act.

The order directs BSE to remit the amount withheld in the escrow account following the earlier order dated January 17, 2007, along with the interest accrued to SEBI within 15 days from the date of the order towards impounding of unlawful gains of the parties.

Despite IPO scam cases wherein SEBI has restrained and punished many key operators for cornering shares in IPOs through fictitious multiple accounts in April 2006, this case highlights how multiple applications continue to be being used for cornering shares by a group.

In case of Nissan Copper, a consent order was passed by SEBI on August 14, 2008, on the applications submitted by Venus Capital Management, ITF Mauritius and VACUF Ltd.

The issue was that the applicants in the consent order applied in the Qualified Institutional Buyer quota allegedly with the intention of exiting out Nissan Copper on the first day of listing with buying support from intermediaries in a structured deal.

Consequent to the said consent order, the three FII applicants agreed and have transferred Rs 2,35,58,673 to SEBI along with the interest.

Another entity, RSS Investment Pvt Ltd, was also found to have indulged in order book manipulation as a result of investigation in Nissan Copper case and two other cases.

The company paid Rs 2 lakh towards settlement consequent to the consent order issued in November 2008.

The outcome of the proceeding in respect of other entities relating to Nissan Copper case is awaited. SEBI had issued an interim order dated January 17, 2007, which refers to many more entities for their role in Nissan Copper case.

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