SEBI Commences Disbursement Process of Disgorged Amount
The disbursement of reallocation amount to 12.75 lac investors from the amount disgorged in the matter of IPO irregularities commenced today. The first set of cheques were handed over by Shri Pranab Mukherjee, Hon’ble Finance Minister of India at a function held on SEBI Foundation Day atNew Delhi today in the presence of Shri Salman Khursheed, Minister of State (Independent Charge), Ministry of Corporate Affairs.
Securities and Exchange Board of India (SEBI) had investigated certain irregularities in the transactions in the shares issued through 21IPOs (Initial Public Offers) during the period 2003-2005, before their listing on the stock exchanges. SEBI upon completion of investigations directed certain persons, not to buy, sell or deal in the securities market, including in IPOs, directly or indirectly, till further directions and initiated proceedings against these person in accordance with SEBI Act and Regulations to disgorge illegal gains and take appropriate action including penalties. Proceedings against such persons are at various stages.
A Committee was set up by SEBI under the Chairmanship of Justice D. P. Wadhwa, former Judge of the Supreme Court of India (Wadhwa Committee), to advise / recommend the procedure of identification of persons who have been deprived in these 21 IPOs and the manner in which reallocation of shares to such persons should take place. Justice Wadhwa committee submitted its report to SEBI while concluding that reallocation in terms of shares will not be practical it enunciated three principles for identification of deprived persons, amount and the method of reallocation, as under:
I. Quantification of the amount of unjust enrichment: The gains associated with the number of shares allotted to applicants who had illegally cornered shares in the IPOs shall be treated as unjust allotments / enrichment.
II. Identification of “deprived” applicants: The totally unsuccessful applicants shall have a call on the reallocation. These applicants will be considered for the amount which is the difference of closing price of shares on the first day of listing / trading at NSE and the IPO issue price.
III. Basis for re-allocation amongst deprived applicants: The totally unsuccessful applicants shall be reallocated money value as computed above from recovered unjust gains, till they each receive the gains associated with minimum shares allotted to the lowest category in the IPO.
IV. Wadhwa committee had recommended appointment of an administrator for overseeing and managing reallocation work. In pursuance SEBI appointed Shri Vijay Ranjan, Retd. Chief Commissioner (Income Tax), as the Administrator to undertake the task of disbursement of the recovered amounts to the identifiedpersons. In pursuance of the recommendations of the committee 1,357,848 unique investors were identified as unsuccessful applicants in one or more of the 21 IPOs listed out in the Justice Wadhwa Committee report.
Among the deprived investors, there are 83,112 investors who are eligible for reallocation amount of Rs.20/- or less. Keeping in view the administrative costs involved, SEBI does not propose to make disbursement to such investors who are eligible for reallocation amount of Rs.20/- or less.
There are about 7.99 lac investors eligible for a reallocation amount of more than Rs.20/- but less than Rs.300/- each. SEBI is making reallocation for the full eligible amount to all such investors amounting to a total of Rs.9.02 crore. This covers 59% of all the identified investors who are eligible for receiving some reallocation.
The remaining 4.75 lac investors each of who are eligible for a reallocation amount of more than Rs.300/- are being paid in the first instance, a sum of Rs.300/- each amounting to Rs.14.27crore.
This is the first step in reallocation process and as further disgorgement amount is realized further reallocation will be made.
Reallocation payment to identified investors totaling about 7.61 lac, whose full details including bank MICR code were available, has been made through NECS/ ECS. In about 5.13 lac cases where the bank accounts of identified investors were not found, the physical warrants are in the process of being sent. This process will be completed by Friday, April 16, 2010.
Proceedings against 105 entities identified as Key Operators (24) and Financiers (81) that wereinvolved in the IPO irregularities, were initiated under the SEBI Act and Regulations there under to penalize them and disgorge the ill-gotten gains they had made. SEBI has been successful in disgorging a part of the gains that such entities have made. It intends to continue its efforts to disgorge further sums in future on completing the legal proceedings currently in progress.
Any investor who was deprived (as determined by Wadhwa Committee) and does not receive either ECS credit or a warrant in next fifteen days may approach Registrar TSR DARASHAW LIMITED (Unit: SEBI – IPO REALLOCATION), 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Mahalaxmi, Mumbai – 400 011 or Office of Investor Assistance & Education, Securities and Exchange Board of India, C4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051 (email: [email protected]) within a period of three months. The Email ID will be working till July 12, 2010.
Source: – PR No.93/2010