SEBI agrees to settle charges against four entities in IPO scam

SEBI probe found that Bahubali Shantilal Shah, Lok Prakashan, Shreyans S Shah and Smruti S Shah provided funds to key operators for cornering shares reserved for retail individual investors in IPOs of IDFC and IL&FS

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has agreed to settle charges against four entities for alleged irregularities in the initial public offering (IPO) scam of 2003-2005, after a payment of about Rs3.3 crore towards settlement charges and disgorgement ill-gotten gains made by them, reports PTI.
As per the settlement reached through regulator's consent mechanism, which allows for settling of charges after payment of certain fees and disgorgement of any illegal gains, the four entities -- Bahubali Shantilal Shah, Lok Prakashan Ltd, Shreyans S Shah and Smruti S Shah -- have collectively made the payment without admission or denial of charges, SEBI said.
The matter relates to SEBI's investigation into irregularities in IPOs of various companies including IDFC Ltd and IL&FS Limited during 2003-2005.
SEBI said the probe had found that the four entities provided funds to key operators for cornering shares reserved for retail individual investors in IDFC and IL&FS IPOs.
After its preliminary probe, SEBI had restrained the four entities in January 2006 from dealing in shares of IDFC and other ensuing IPOs till further directions.
Pursuant to further investigations, SEBI issued show-cause notices for alleged fraudulent and unfair trading activities by the concerned entities, while proposing a direction to restrain them from securities market for a further period of time and disgorgement of an amount totalling Rs1.92 crore.
While the proceedings were in progress against them, the four entities offered a settlement of charges through SEBI's consent mechanism.
The settlement proposal was revised further in April this year, after which SEBI's High Powered Advisory Committee recommended the case for settlement on payment of Rs1.35 crore as settlement charges and Rs1.92 crore towards disgorgement of ill-gotten gains made by them, collectively.
SEBI said it accepted the recommendations and the four entities have collectively made the payments.
Bahubali Shantilal Shah has paid Rs17.60 lakh as settlement charges besides Rs25.14 lakh towards disgorgment money.
Lok Prakashan Ltd has shelled little more than Rs 1 crore to settle the charges in addition to Rs1.43 crore as disgorgment money, SEBI said.
According to SEBI, Shreyans S Shah has reached settlement by paying Rs8.32 lakh and another Rs11.89 lakh as digorgement money. Further, Smruti S Shah has paid Rs8.40 lakh for settlement and Rs12 lakh as disgorgment money.
SEBI said that enforcement actions, including commencing or reopening of the proceedings, could be initiated if any representation made by the entities is found to be untrue.
The consent order is effective from 1st November.


'Banks should look at home loans with lower EMI, longer tenure'

The RBI draft report on home loans also suggested that banks should introduce and popularise long-term fixed rate home loan with a provision of re-fixing the interest rate after 7-10 years

Mumbai: The Reserve Bank of India (RBI) has suggested that banks should look at the possibility of introducing home loans with lower equated monthly instalments (EMIs) and higher repayment period of up to 30 years, reports PTI.


The RBI draft report on home loans has also suggested that banks should introduce and popularise long-term fixed rate home loan with a provision of re-fixing the interest rate after 7-10 years.


These suggestions form a part of a report, 'Feasibility of Introducing More Long-Term Fixed Interest Rate Loan Products by banks. RBI has invited comments from the public on the report by 23rd November.


At present, banks give home loans with a maximum tenure of 15-20 years only.


The report also suggested that banks should popularise fixed deposit schemes for periods of over five years as it would help them procure long-term funds.


The banks, the report added, may also raise funds by floating 30-year bonds on the line of government securities.


The report said "transparency in retail loan products should be appropriately addressed and the customers be educated by lending institutions on the possible impact of rate changes on EMIs to enable borrowers to have better planning with regard to their repayments".


During 1977-2000, fixed rate loan products were popular.


However, post 2000, these products gave place to floating rate loans mainly due to falling interest rates in the early 2000s and significantly higher interest rate on fixed rate loan products in many cases.


The encouragement to fixed rate home loan, it added, is necessary as "customers are not able to understand the intricacies of economic cycles, changes in policy rates, transmission of the same and the consequential sudden increase in EMIs therby exposing themselves to interest rate risk".


SEBI mulls trading pause, annuls flash crash cases

SEBI is looking at introducing a small-duration trading pause and annulment of orders to ring-fence equity investors in a 'flash crash' situation

New Delhi: Capital market regulator Securities and Exchange Board of India (SEBI) is looking at introducing a small-duration trading pause and annulment of orders to ring-fence equity investors in a 'flash crash' situation, reports PTI.
The proposed steps are aimed at containing the impact of any unusually large movements in share prices of big blue-chip stocks and benchmark indices, especially those triggered by the use of high-speed technology that allows execution of multiple trade orders within milli-seconds.
SEBI is of the view that immediate steps are necessary to tackle the challenges posed by possible mis-use of such a technology to manipulate the markets, a senior official said.
The steps being considered by the SEBI include allowing for a 'pause' or temporary halt in trading activities after any occurrence of flash crash-like situations, he added.
Besides, it is also being considered that the already executed buy or sell orders should be annulled if they are found, or even suspected, to have triggered flash crash cases.
A final decision on this matter would be arrived at after taking into account recommendations of SEBI's Technical Advisory Committe, whose members include outside experts. in this regard.
A 'flash crash' in the stock market refers to that situation when a major stock or a benchmark index suddenly falls by a wide margin. The Indian markets witnessed such a case last month when benchmark index Nifty fell by about 900 points within seconds due to erroneous trade orders.
While a 'trading halt' system is already in place in Indian markets, which gets triggered once benchmark indices Sensex and Nifty move at least 10%, there are no such mechanism to tackle any large-scale crash in other indices or individual stocks.
In the past, there have been cases of large-scale sudden plunge in individual share prices, mostly due to high-speed latest technology trading systems, without any similar movements in the two key indices, the official said.
Since the 900-point Nifty flash crash, these issues are being actively discussed within SEBI and with the stock exchanges, among others. SEBI's International Advisory Board also discussed the matter at its meeting earlier this month.
It has been noted that market regulators across the world are currently facing technological challenges posed by High- Frequency Trades and Algo Trading, and a discussing ways in which regulatory authorities and stock exchanges can modify market structures to tackle these issues.
The regulator has also asked the exchange to ensure compliance by the brokers to fair trading regulations and to be extra careful in their trades to avoid erroneous orders that may cause unusual movements in share prices.
Both the leading exchanges, BSE and NSE, are consequently seeking stricter adherence by their member brokers to compliance with the due diligence norms to avoid repeat of a situation similar to Nifty flash crash in October.


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