Dr Mohan Gopal’s explosive exposé of SEBI’s functioning under Bhave

Dr G Mohan GopalThe former member of the SEBI Board, in a letter to the prime minister, alleges how an "informal clique of current and serving bureaucrats, SEBI officials, lawyers and corporate interests orchestrated a subversion of the due process of law". It vindicates Moneylife's stand on various regulatory issues that large media houses have been ignoring 

Dr G Mohan Gopal, who heads the National Judicial Academy (NJA) at Bhopal, is in the news for his letter to the prime minister, pointing to “the gross abuse of power and corrupt practices in the SEBI board” to “protect SEBI Chairman CB Bhave”. Moneylife Foundation has accessed the letter written to Dr Manmohan Singh on 24 December 2010, which was obtained by activist Subhash C Agarwal using the Right to Information Act (RTI).

The letter, we find, is far more explosive and detailed than has been indicated by media reports so far. Dr Gopal has not only described the manner in which SEBI systems and processes were vitiated to protect Mr Bhave, but it also highlights four “structural flaws” in the “legal framework for securities regulation”, something that other self-appointed market experts have been labelling as perfect and getting favourable mention in the media.

Moneylife has already reported at length on the NSDL issue, which Dr Gopal describes as “ ’Sebi-under-Bhave’ judged and exonerated ‘NSDL-under-Bhave’ through a process that was thinly disguised as independent, but was, in fact, deeply vitiated and subverted”. 

Here are highlights of the many larger issues raised by Dr Gopal, on which the prime minister’s office has remained silent for the past five months.

On subversion of the action against NSDL: Dr Gopal says, “an informal clique of current and serving bureaucrats, SEBI officials, lawyers and corporate interests orchestrated this subversion of the due process of law. They illegally interfered with independent SEBI adjudication, manipulated legal opinions, suppressed and misrepresented facts and misled the SEBI Board and Government officials about the legality of the Orders. Law, regulations and established precedent were violated. NSDL was given undue special treatment. NSDL was relieved of a fine of crores of rupees, and SAT decisions adverse to SEBI but favouring NSDL, were not appealed to the Supreme Court as they should have been”.

On how the SEBI Board declared orders against NSDL as void: Dr Gopal says, “One of the most shocking and unprecedented actions taken by SEBI to exculpate NSDL was the board–for the first time in SEBI’s history–setting aside quasi judicial orders which are, under the law, subject only to judicial review. He goes on to describe how the SEBI board “entirely disregarded” a statement by one of India’s most eminent and respected jurists (former chief justice of India, J S Verma) who had said that SEBI’s action “violated established legal and Constitutional principles”.

On securities law: Dr Gopal says, four structural fault lines in the legal framework for securities regulation made this abuse of power possible. These are:
1. Inadequate transparency, public accountability; and parliamentary oversight: Dr Gopal points out that unlike in India, the US Securities Exchange Commission meetings are open to the public and the US Senate exercises close scrutiny over its workings. There is nothing comparable in India. There is also no framework for whistleblower protection. Dr Gopal points out how he was subjected to retaliation and attack without any protection. (It is stunning commentary of the poor governance in India that an extremely privileged and connected member of society, who heads a premier institution like the National Judicial Academy should complain of such harassment). Importantly, Dr Gopal joins voices like ours at Moneylife when he says, that there is ‘a serious deficit in investor voice’, essential for effective governance. He says, ‘SEBI needs to encourage investor voices instead of being hostile to them unless they are friendly, in which case selective patronage may be extended to them’. Some of the friendly voices which receive selective patronage are large media houses.
2. Lack of protection against conflict of interest: Dr Gopal says that a Code of Conduct for the SEBI board was evolved at his instance, but the “mechanism was violated and then dismantled in the context of the NSDL matter”. He says, that whole-time members of the SEBI board who were to be explicitly excluded from NSDL matters (since they report to the SEBI chairman operationally) were included in the decisions to favour Mr Bhave. Dr Gopal points to the role of Mr Mohandas Pai, who represented a SEBI-regulated entity, to chair the meeting that finally exonerated NSDL. The SEBI board, he says, “generously excused the conflict of interest arising out of the business relationship between Infosys and NSDL”. Also, “it was perhaps for the first time in Indian history that judicial power was exercised by a serving private sector corporate official”. As a result of these conflicts of interest, an influential bureaucrat-corporate-media nexus has emerged that has immense power to influence SEBI decision-making to its own advantage.
3. Ineffective framework for law enforcement: Dr Gopal says that the structure for law enforcement in SEBI is seriously flawed (something that Moneylife has repeatedly pointed out). There are overlapping enforcement and punitive provisions in the Act, which need to be rationalised. This subjects a regulated entity to multiple proceedings without a clear distinction between them. He also says, as we have in the past, that “major violations” established through investigation “are excused without punitive action through opaque consent orders and faulty adjudicator orders favouring wrongdoers–in such cases review by SAT (Securities Appellate Tribunal) would never be sought” because neither SEBI nor the wrongdoer want it. Consequently, “investors at large and the market are the voiceless victims”. Dr Gopal points out to how a company guilty of “criminal market manipulation” was let off by a whole-time member asking it to “be more careful in future” (we believe this refers to the Zee group’s role in the Ketan Parekh scam). He says, SEBI does not have “adequate focus and priority on law enforcement”, with the result that it bent “backwards and violated the law to protect a favoured regulated entity rather than pursue it to enforce the law”.
4. Outdated governance structure: Under this head, Dr Gopal says that the SEBI Act badly needs to be redesigned. It contains “too many explicit and implicit levers of bureaucratic and political control of the regulator on one hand and too little public oversight, transparency and public accountability on the other hand. SEBI in effect is run by an informal caucus of serving or former civil servants rather than domain experts”. Having said that, Dr Gopal accuses the finance ministry representative (Dr KP Krishnan) of exercising “undue influence in the functioning of an independent regulator through informal back channels, through which SEBI officials were funneling information and documents to him, which he legally should not have access to. Dr Gopal says, “the government’s interaction with the regulator would be ‘over the counter’ and not ‘below the table’.” Apart from this stunning indictment, the former SEBI board member, also says how SEBI and the National Institute of Securities Management (its education affiliate) “command huge financial resources with little accountability and transparency in its use”. Further, the SEBI board “lacks relevant expertise” because it is “dominated by babus–serving and ex-bureaucrats”.

Dr Gopal ends his five-page letter by asking the prime minister to order a high-level inquiry into SEBI decisions in relation to NSDL during Mr Bhave’s tenure and to look into the structural issues raised by him.

What did the Prime Minister do? He merely forwarded the letter to the finance ministry. Frankly, even today, this explosive letter by Dr Gopal will probably attract some media attention, only because SEBI has been forced to do an about-turn due to the activist interest shown by the Supreme Court of India into the manner in which SEBI has been subverting regulations.

Here is a copy of the letter written by Dr Mohan Gopal to the prime minister


Dr Mohan Gopal's letter to the PM -

  • Like this story? Get our top stories by email.



    Dr Vaibhav G Dhoka

    9 years ago

    SEBI has become WHOLLY CORRUPT regulator.The move should to SCRAP SEBI.to save investors from Financial sharks

    Rohit shah

    9 years ago

    sebi should take the opinion of distributors as well as investor before deciding about entry load


    9 years ago

    SEBI do not help the investors who are in difficulty. I have a complaint against ICICI Bank since 2001 that I lost Rs.5 lacs due to their mishandling my Demat account and due to their faulty Internet system. SEBI had given me 4 acknowledgements for the same complaint during the last 6 years but done nothing. The complaint was forwarded by RBI to SEBI. NSDL also is keeping quiet about the wrong doings of their participant/agent; even though they know that ICICI Bank is responsible to recoup my loss which also known to SEBI.

    C H Mehta

    9 years ago

    Hanging SEBI and Mr Bhave without a trial.

    There are lies,damned lies and statistics. I wonder what has led a legal luminary like Dr Mohan Gopal to resort to some of these tactics in order to lead a personal attack on Mr Bhave, one of the finest and honest product of the Indian Civil Service. In the process, Dr Gopal has conveniently forgotten how SEBI became the real champion of small investors under Mr Bhave’s regime and how transparency and objectivity became the hallmark of this regulatory agency. Let us therefore examine the facts which Dr Gopal has forgotten to mention:

    1. Dr Gopal accuses Mr Bhave of not being investor friendly and of providing selective patronage. The reality is that it was only under Mr Bhave that interests of the small investors were truly promoted at the cost of big business houses and institutions. For instance, introduction of ASBA saved more than Rs 100 cr for the investors. The ban on entry load saved Rs 2500 cr for the investors. The allotment time for IPOs was reduced from 21 days to 10 days and the preferential treatment to Qualifying Institutions, which was grossly unfair to small investors, abolished. What is more, for the first time SEBI recovered more than Rs 25 cr from wrong doers and actually disbursed it to the investors. And while pursuing the cause of investors, Mr Bhave tread on many big shoes and displeased many big houses and institutions without any fear or favour. If this is not investor friendliness, then Dr Gopal has to provide us with a new definition in this regard.

    2. Dr Gopal complains about lack of transparency in SEBI’s working. How far is this statement away from truth can be gauged from the fact that SEBI today is the only regulator that puts out its Board agenda and minutes on its web site. All its major decisions as well as compounding decisions are available on its web site for every one to see and criticise. In fact, SEBI which was a fortress of secretiveness earlier, became an open book under Mr Bhave whose own public career too has been like a open book. Through its compounding schemes which Dr Gopal criticises , SEBI has reduced litigation and pendency of proceedings significantly, and in the process has collected fines up 40 to 50 times the earlier levels. If this is a crime, then many of the Indian laws are flawed as they all have built in compounding schemes!

    The big question is why Dr Gopal is resorting to such mud- slinging without facts and figures to back up his accusations. The reason probably lies in the fact that the SEBI Board which had met to discuss the report of Gopal & Leeladhar on the SEBI-NSDL controversy decided to reject the report. That this happened so even though Mr Bhave had reclused himself from its proceedings might have piqued Dr. Gopal all the more. He needs to understand that SEBI is a statutary institution created by an act of parliament. Both SEBI and its Chairman act under this Act. If Dr Gopal had serious misgivings about SEBI’s structure, its working and its decisions, he should not have served his full term of 3 years on its Board. Why wait for his term to get over before launching his so-called crusade against SEBI? I would also like to ask him, as the self appointed champion of governance, as to how many SEBI Board meetings he attended during his tenure with SEBI !

    The pity is that Money Life has adopted the same vendetta type behaviour against Mr Bhave as Dr Gopal. I really wonder why?
    C. H. Mehta

    Suresh Vaideeswar

    9 years ago

    Kudos to Dr. Mohan Gopal on this expose. That takes courage and conviction to speakup about corruption at high levels of governance. As one of the 'stupid' Indians who has been praising Bhave and Sebi, for their great work in MF area, I want to thank you for catching them with their pants down. I am still just a Subject in the SEBI Empire.

    Tira T

    9 years ago

    Bhave undoubtedly had extremely high contacts and networked connections, as one reader has rightly pointed out, to be planted as SEBI chief with an agenda ignoring the right persons required at this post in national interest. A corrupt country naturally will opt only for corrupt prople at the top. And that exactly is the present situation. The persons who are/to be subject to investigation must have already transferred their booyu ti the tax havens with the knowledge of the authorities.

    K B Patil

    9 years ago

    When you have a PM like Manmohan Singh, what do you expect? He may probably go down as the worst PM India has ever had, beating other worthy competitors like IK Gujral and Deve Gowda. Now, even the mask of being an honest man has been removed. It is no wonder that you see guys like Kalmadi, Raja and Bhave heading every government organisation.

    There are small steps to make the life of the small investor better. For instance, SEBI should have made all listed companies to post their financial results for atleast the last five years on their website. I guess they are taking some steps now. Some companies dont even bother to have a website. For instance, Artson Engineering didnt have a website. The link took me to a "Under Construction" page for months. I bought this stock in 2007. It was taken over by Tatas. On being fed up of seeing the same page for months, I sent two emails to the company. They did not even bother to acknowledge. I followed up with a complaint to SEBI. What was the response from them? Nothing. They were too busy signing consent orders for moneybags. SEBI is only doing the bare minimum to justify its existence. It can easily do more.


    9 years ago

    Mr Bhave brought absolutely incompetent people to SEBI just to suit his designs. These persons could only say yes to him. This facilitated audaciously arbitrary functioning of SEBI under him. There should be a thorough probe into the working of the Members and EDs brought by him to SEBI and they should be punished for all their wrongs.



    In Reply to Samuel 9 years ago

    I fully agree. But we should not forget that Bhave was made SEBI Chairman by Mr Chidambaram. He picked him from nowhere and not only this Mr chidambaram forced PMO to send a letter to finance ministry in Dec 2010 to extend the tenure of Bhave. SO all in all Congress is bent upon having the most corrupt people as its various ministers. Probably this is the ideology they are following. After all Sonia needs most loyal people around her who gives her the best cover.


    In Reply to Renu 9 years ago

    Renu please do not forget that every body can not carry arrogance. Only the most competent may. Unfortunately the bunch brought by Mr Bhave was / is thoroughly incompetent also.... "KARELA, AUR NEEM CHADHA".......


    9 years ago






    In Reply to jk 9 years ago

    are u a mutual fund investor (if yes the since?) or are u a member of 5% deserving/competant middleman called financial advisor??????

    K B Patil

    In Reply to jk 9 years ago

    Maybe that's one of the rare good things that Mr. Bhave did. Can you name a decisive step by him to help small investors. SEBI is like a corpse as far as interaction with small investors are concerned. Now, even when a villager knows what a PC is, the small investor cannot expect to lodge an online complaint with SEBI and expect prompt response. What does that prove? That Bhave was a messiah for small investors?


    9 years ago

    The major benefit also goes to CDSL which too had actively facilitated opening and operations of demat accounts.

    Besides, one should have been present during SAT hearing to see in what feeble manner SEBI presented its case against NSDL & CDSL. The counsel who appeared for SEBI had also earlier appeared from the Appellant's side in this IPO scam.

    SEBI order records that CDSL had distributed to various DPs including Centurion Bank of Punjab with almost 25,000 BO ids by using excel calculator in advance without following the system driven procedure. In this entire alleged scam there is no mention about these over 25,000 demat accounts opened by Centurion Bank of Punjab [CBPL] and who benefited therefrom. Another SEBI order records that CBPL had solicited business from various brokers with strong customer base evidencing the role played by such brokers and possible benefits they got. CDSL senior management has admitted that they extended End of Day timing to facilitate opening of demat accounts by Karvy DP.

    What Dr. Gopal says may possibly be a tip of ice berg. The functioning of SEBI needs to be revamped.

    Madhusudan Thakkar

    9 years ago

    Please go through following link also. http://www.livemint.com/2011/05/10000326...



    In Reply to Madhusudan Thakkar 9 years ago

    Thank you, Mr. Thakkar, for the link to Livemint.

    radhika menon

    In Reply to ABanerjee 9 years ago

    i saw this an remembered that livemint always projected bhave as the greatest. so i searched and found i was right. check this too... its nice to know http://www.livemint.com/2011/01/31221944...


    9 years ago

    A really scintillating piece, though I recall having come across a similar article elsewhere by one M.R.Venkatesh. The antics of the subject person were too wellknown all through and that is why he was handpicked for the position making him superior in rank to some of the members of the SEBI Board. There was one Anantharaman, for instance, from the Indian Revenue Service of the 1968 batch who was known as an excellent administrator and expert investigator of frauds with wide and varied exoperience. He was made to serve as a mere member under a rank junior for the latter's networked clout. As a result, SEBI became a goldmine for a band of looters who paid hefty sums of money to get deputations to it. One stockbroker once lamented to me that, even the lowest of the functionaries in SEBI returns home at the end of every working day with a minimum of Rs. 1 lakh in his bag and his information to this effect to the CBI was never acted upon. The standard of SEBI's internal affairs are unthinkably low, but with high voltage direct hotline connections with some of topmost political heavyweights actively interested as players in the money (stock) market, it is above law and CBI is really helpless. This in any case is the condition in any Regulator's office, with the slot of the top positions being on auction or going to the best facr loked by the powers that be! I suggest, Moneylife reprints the above referred piece by MR Venkatesh too in its issue.


    9 years ago

    What a joke of a prime minister Manmohan Singh is! Now that the scam has been exposed and is out in the open and there is prima facie evidence of wrongdoing on the part of CB Bhave, what does "Honest" Singh do? He forwards the file to the department next door! What a shame of a man you are, Mr Prime Minister! A weak and cowardly leader like you is the reason this country has continued to go to the dogs.


    9 years ago

    For those interested in relentless boot-licking reports by other media houses:

    Shame on them.

    Moneylife, a tiny publication, truly stands out for exceptional clarity, courage and commitment

    Thanks for choosing to be the lone voice


    Madhusudan Thakkar

    In Reply to Rakesh 9 years ago

    Team Moneylife deserves sincere gratitude for this expose.Radia Tapes have shown how mainline media is manipulated by unscrupulous and powerful people.


    In Reply to Madhusudan Thakkar 9 years ago

    thank you money life.. this is really an eye opener..


    9 years ago


    'Non-est' orders on NSDL become ‘est’ again

    The scandalous ganging up of some SEBI members to protect CB Bhave and NSDL—reported extensively only in Moneylife and conveniently glossed over by all mainline media—is coming back to haunt SEBI

    There were two major developments over the weekend, which underline the murky and the capricious nature of capital market regulation (Mirror, mirror on the wall…) over the past three years that we have been highlighting.

    Moneylife has been the only publication to point out that the spate of eulogies about CB Bhave’s tenure as chairman of the Securities & Exchange Board of India (SEBI) while the mainline media's coverage like,“best SEBI chairman” and “the best three years of SEBI ever”, were motivated and highly misplaced.

    Strangely, with Mr Bhave gone and with a new chairman at the SEBI, the mainline media is now quietly changing its tune.

    Moneylife has long pointed out how the government had appointed CB Bhave as chairman when there was pending litigation between SEBI and the National Securities Depository Ltd (NSDL), which he founded and headed for over a decade. The SEBI action against NSDL was based on an independent inspection ordered by the regulator into the systems, processes and the multiple initial public offering (IPO) applications scam that went unnoticed by both depositories, indicating serious flaws in their operations.

    For the record, the inspection report showed that the systems in the Central Depository Service Ltd (CDSL) were far worse than that in NSDL.

    The Finance Ministry came up with a dubious strategy to “ring-fence” Mr Bhave as SEBI chairman from the NSDL-SEBI litigation by appointing a two-member bench of the SEBI board to investigate the allegations afresh. It comprised Dr Mohan Gopal, who headed the National Judicial Academy and RBI's former deputy governor V Leeladhar.

    However, it was soon clear that the ‘ring-fence’ was a sham and SEBI moved rapidly to eliminate all traces of the IPO scam, paving the way for whitewashing NSDL and exonerating Mr Bhave. Almost everyone accused was cleared through consent orders. The most outrageous was the one-line order closing the case against CDSL, with no attempt to ensure that it has cleaned up its act.

    While Mr Bhave recused himself from these meetings and decisions, SEBI’s whole-time members acted for him with strong support from Dr KP Krishnan, then Joint Secretary, Capital Markets. However, the Finance Ministry’s plan (formulated by Dr KP Krishnan, under finance minister P Chidambaram) received a big jolt when the Mohan Gopal-Leeladhar bench upheld many of the charges against NSDL instead of dismissing them.

    Immediately thereafter, SEBI with the support of the finance ministry launched a series of actions to bury the report, then discredit and humiliate Dr Mohan Gopal and finally throw out the orders of the bench by declaring them ‘non est’. Mohandas Pai, then with Infosys Ltd, and the only private-sector employee to grace the board of a regulator, lent his muscle at that stage.

    A Chartered Accountant who moved to oversee human resources in Infosys, Mr Pai doubled up as a legal expert and chaired a crucial SEBI board meeting which declared the Pai–Leeladhar orders ‘non est’, or not existing in the eyes of the law.

    Even the RBI deputy governor Usha Thorat and other government nominees chose to play along, rather than raise questions.

    The issue was taken to court by an NGO, leading to the Supreme Court hearing the case more sympathetically after Mr Bhave’s term as SEBI chairman had ended. On 8th May, Manoj Mitta of the Times of India, who had first reported how SEBI has buried the orders of the Mohan Gopal-Leeladhar bench reported that SEBI had now filed an affidavit (after its quick board meeting on 26th April 2011) in the Supreme Court (on 5th May) saying it would "reconsider" the very (two) orders it had declared as "non-est" (invalid) in November 2009 when Mr Bhave was chairman. The SEBI board’s U-turn happened after the Supreme Court pulled up the regulator for preventing the orders against NSDL from coming into effect and asking it to "pass an appropriate resolution and place it before this court for further consideration".

    With intriguing coincidence, in the run-up to this affidavit, several publications (Mint, Times of India and The Economic Times, among others) started a loud drumbeat on how Mr Bhave was unfairly denied an extension to his three-year tenure. Each report conveniently ignored the dubious goings-on during his tenure to bury the investigation and orders against NSDL.

    For the record, however, NSDL is a fairly well-run organisation, which has an unclear regulatory structure that Moneylife alone has pointed out so far. This could pose serious issues in the future, but engages neither the regulator nor the media.

    Unfortunately, a headstrong Mr Bhave took the attitude that NSDL is a perfect institution and cannot be criticised for any failing. This attitude led to a rash of dubious actions, where he ended up twisting all systems and processes to justify his stand.

    On 8th May, PTI reported how RTI (right to information) activist Subash C Agarwal had obtained a letter written by Dr Mohan Gopal on 24th December 2010 to the Prime Minister, where it said that SEBI had “abused” its power to protect Mr Bhave from an independent inquiry into NSDL’s role in the IPO scam.

    The PM’s inaction (the letter was forwarded to the finance ministry), is yet another example in the long lost of wrongdoing that the Prime Minister condoned with his silence and inaction. In fact, neither the PM nor the Finance Ministry looked into any of the dozens of capricious and motivated decisions of SEBI that were reported by Moneylife over the past two years.

    To recap the various issues leading to the current, here is the report of a two-member bench of the SEBI board, whose findings were declared void. This was part of a series of dubious decisions that Moneylife has reported earlier.

    1. Appointment of CB Bhave as SEBI chairman when there were SEBI investigations pending against the organisation he previously headed.

    2. The assumption, implicit in this decision that NSDL was not even guilty of minor transgressions or carelessness.

    3. Attempt to artificially "ring-fence" Mr Bhave from NSDL-related issues.

    4. Appointment of a two-member board committee (comprising Dr Mohan Gopal and RBI's former deputy governor V Leeladhar) to decide NSDL-related issues.

    5. The mistake in assuming that NSDL will get a clean chit from the bench.

    6. The attempt to bury the Gopal-Leeladhar report for several months.

    7. Making the report public only after a public interest litigation was filed in the Andhra Pradesh High Court.

    8. Exoneration of the rival CDSL through a one-line order, although charges against it were far more serious.

    9. And finally, the controversial board meeting which exonerated NSDL and refused to consider a contrary legal opinion by no less than Supreme Court's former chief justice JS Verma.

    Unfortunately for SEBI, a Delhi-based NGO called Manav Adhikar filed a special leave petition before the Supreme Court, which led to a direction by the apex court (on 28 March 2011) to reconsider its decision.

    You may also want to read...

  • Like this story? Get our top stories by email.



    N Dey

    9 years ago

    This and other artcles will not be able to achieve the desired results. A corrupt officer is such not overnight but is groomed into a corrupt mindset right from the young adulthood period so that by the time the person becomes an officer in the bureaucratic machinery the person is ready to join the bandwagons of his forerunners in the field of corruption. So, such officers or persons start cultivating contacts, reaping benefits, enjoying some benefits and plough back the other portion as investment in the cultivation process and so on. Thus such officers start visiting abroad officially from comparatively young age as officers and start opening bank accounts (before FERA/FEMA was amended) in various countries in the names of wives/children, etc. And, if such officers attend short-term training programmes almost every alternate years and in small places (say, Ilkley in Yorkshire-a place even Britishers would not readily know about), the bank accounts opened in the 80s in various small local banks would not even be known to the Indian authorities. Thus, these prople plan and build their careers as professionals on BOLT method and get rewarded at every step for their (personal) services rendered. Such people alone become CMDs of big oil giants, PSUs, and other bodies now in the limelight. An ordinary, honest and low-key officer is unwanted-bosses do not want their honesty and integrity, in fact, even the society as a whole also is not interested in honesty. Everyone wants to see only materially successful people with moneypower and a lot of political and bureaucratic clout. The persons being discussed are above all law and more equal than others and thus successful at every step, so much so that they get the posts they demand by way of right. Hence the critics of the great former SEBI chief are wrong in surmising that the govt. would proceed against him.

    z mehat

    9 years ago

    It is said " Atee sarvatya varjayate". Excess is always bad. The SEBI regime under Mr Bhave crossed all limits of arbitrariness. It was infact painful to see the SEBI top brass including WTMs passing orders which smacked of an attitude "we are answerable to none". To be fair to them, their actions resulted into embarrassing situations for SEBI not only because of this attitude. There was total incompetence and non-application of mind (if they had the right kind) compounding the matters. Executive Directors who had seen the kind of importance bestowed on them first time in their life at or around the age of 50, had gone berserk. Mr Bhave was not bothered about all this till they always said "YES SIR" to him. Unfortunate and very Ugly chapter in the history of existence of SEBI. Hope the present Chairman learns from all this>>>>>>>>

    Whatever may happen to the IPO investor, legal firms make money anyway

    Legal e-mag reports how much law firms made from IPO, QIP rush last year. Amarchand & Mangaldas, Luthra, Crawford Bayley top the list

    2010-2011 saw quite a few memorable IPOs (initial public offers) and QIPs (qualified institutional placements) last year. Whatever followed afterwards-with the market, the issuers, banks, the buyer companies or individuals-it was a win-win situation for legal firms that were consultants.

    In its second annual report on capital markets published recently, "Bar & Bench", a legal webjournal, has listed the top ten legal firms that benefited as counsellors during the last fiscal. Amarchand & Mangaldas & Suresh A Shroff & Co (AMSS) emerged at the top of the list. Second is Luthra & Luthra which undertook some 20 transactions, then Crawford Bayley & Co with 18, AZB & Partners with 16 deals and Khaitan & Co with 15.

    "Top-tier domestic law firms charge anywhere between Rs30 lakh (about US$65,000) to Rs80 lakh (US$175,000) for an IPO. For the EIL (Engineers India Ltd) IPO, insider sources revealed that Luthra and DLA Piper jointly quoted about Rs1.35 crore (US$300,000), Amarchand and O'Melveny quoted Rs1.65 crore (US$366,000) and S&R along with Dorsey had put in a bid of about Rs1.75 crore (US$388,000)," the report says. Yes, you can raise your eyeballs now.

    Bar & Bench's yearly review has everything on upcoming IPOs, commentaries on select sectors and market expectations, and a round-up of the IPOs and QIPs that happened last year. It may appear surprising, that a legal magazine would do the job of a market analyst. After all, legal discussions and cases are supposed to be their field of interest; and incidentally, lawyers are also supposed to be occupied with courts instead of watching the movement on the Sensex. But if you are a financial consultant, you will see why it is imperative.

    Financial and legal counselling is big money today. With every IPO and QIP that hits the market, banks, companies and wealthy individuals will make a go at a law firm for advice. Whatever follows-whether the buyer goes bankrupt or emerges with flying colours, whether the market crashes or its sunshine-the counseller stacks up his safe in exchange for his pearls of wisdom.

    And what a stack it is! Amarchand acted as counsellers in 43 IPO/QIP transactions, of which 19 were worth more than $100 million. Their transactions included the Coal India IPO, Standard Chartered PLC IDR and PO of Essar Energy PLC. If we take Amarchand's fees at Rs1.65 crore for all 43 transactions, it will come to Rs70.95 crore. Similarly, Luthra would have earned Rs27 crore. However, the report announces that the firms cut their fees 'drastically' for government IPOs this year.

    Apart from the Coal India IPO, none created a buzz, and most of them have seen the public react hesitantly. As Moneylife reported earlier, the BSE IPO index has moved only 6%, since its launch on 24th August 2009 to 29th April 2011. However, whatever the outcome, the legal firms have surely profited. And this is money earned during a time when there was a lull.

    The markets are picking up again. While no major IPOs are being talked about now, they could surface after some time. The Power Finance Corporation's Rs6,000-crore FPO is scheduled to hit the market soon. Meanwhile, there will be a lot of other places from where the legal firms will get their moolah. After all, advice is for all times, high or low.

  • Like this story? Get our top stories by email.




    9 years ago

    In the process of bringing an IPO, many intermediaries make money - brokers, bankers, printers, registrars, auditors, rating agencies and legal advisors, for rendering their services. That is fine. But in some IPOs, the BRLMs collude with the promoters and hike the issue price and also play some role in rigging the price after listing. Those BRLMs are to be black listed.


    9 years ago

    Are there are corporatised law firms which are listed?

    We are listening!

    Solve the equation and enter in the Captcha field.

    To continue

    Sign Up or Sign In


    To continue

    Sign Up or Sign In



    online financial advisory
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone