Standard Chartered tries to cover up its messy past, but SEBI is in a slumber

The Bank has glossed over the pending litigations against it in connection with the 1992 securities scam, in its IDR offer document. However, the market ‘watchdog’ seems least bothered by this astonishing lack of transparency 

Standard Chartered Bank’s draft red herring prospectus to raise $500 million-$700 million through the first-ever issue of Indian Depository Receipts (IDRs) has completely blanked out at least 15 litigations pending against it in connection with the securities scam of 1992 and a foreign exchange scandal involving the misuse of its vostro account, also in the 1990s.

The prospectus has reportedly been cleared by the Securities and Exchange Board of India (SEBI), which is fully aware that most litigations pertaining to the 1992 scam are still dragging their way through the Indian judicial system. It is shocking that the Bank has attempted to avoid disclosure, given that the Bank's deep involvement in the scam is widely known in India and the IDRs are being sold to Indian investors. What is worse, when asked about the failure to disclose litigation pending against the Bank, SEBI has chosen to not to respond to the emails marked to the entire top brass of the Bank.

On checking with the Bank, Arijit De, head of external communications, has this to say: “With reference to your email to Neeraj Swaroop, our response is as below: The IDRs represent the shares of Standard Chartered PLC, UK , the ultimate parent company of Standard Chartered Bank, India. In accordance with the disclosure requirements under SEBI Regulations, IDR Rules, other applicable laws and international practice, SC PLC has made appropriate disclosures of all material issues in the draft offer document filed with SEBI. We have nothing further to add beyond what is disclosed in the DRHP.”

However, a simple reading of page 414 of its draft red herring prospectus suggests otherwise. It says: “As of the date of this Draft Red Herring Prospectus, neither the Company, any member of the Group, any Director, or any material associate of the Company (emphasis ours) are involved in any material governmental, legal or arbitration proceedings or litigation and the Company is not aware of any pending or threatened material governmental, legal or arbitration proceedings or litigation relating to the Company, any member of the Group, any Director or any material associate which, in either case, may have a significant effect on the performance of the Group, and there are no liabilities or defaults (including arrears and potential liabilities) in relation to such material proceedings or litigation which would be required to be disclosed under the SEBI Regulations.”
Moreover, the cases filed by the Enforcement Directorate and in the Special Court do not all pertain to the Indian operations (the Bank's Indian operation itself is significantly large and important, especially after the impact of the global financial crisis). In fact, many of them specifically name a former chairman of the Bank, Rodney Galpin.

Among the cases that we have information about include some in the Special Court set up to try the securities scam related offences (MA 365/2003 – SCB v/s the Custodian & others; Suit 45 of 1995 SCB v/s Andhra Bank; Suit No 6 of 1994 SCB v/s Andhra Bank and Suit No 32 of SCB v/s Andhra Bank). Then there are at least half a dozen cases filed by the Enforcement Directorate, many of them in 2002. We have sent a list of all these cases to SEBI, but have no response from the regulator.

Are these cases serious enough to make a difference to the Bank's global operations and performance? Probably not. Also, many Indian companies have successfully raised funds, even after disclosing that the main promoters were accused of murder or worse. The issue is the Bank's lack of transparency, while selling a financial instrument to Indian investors.

What is worse, the failure to insist on this disclosure reflects even more badly on the market watchdog. In its very first IDR clearance, SEBI has shown that it is probably overawed with the international bank's plans to raise funds in India or its fat, 801-page offer document. Either way, it is not insisting on the same transparency and disclosure standards that it expects from Indian companies, which should be a matter of serious concern, given that global banks have not covered themselves in glory in the lead-up to the financial crisis of 2008.

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




    8 years ago

    SCB is continuing its ethical frauds in the domain of home loans & investment cum insurance policies with covert high allocation charges. Government should take a step against them.


    Sucheta Dalal

    In Reply to Debaprasad 8 years ago

    Do send us details. You can email me at [email protected] or write to the Editor, Debashis Basu at [email protected]

    B Tellis

    1 decade ago

    I have worked in the capital markets in the US and UK, and hence am aware that western companies are not required to list down litigation issues in a public filing unless they are "material". In Stanchart's case it is public knowledge that they've written off all losses related to the Scam and that all the cases currently going on are "recovery suits"- that is, if they win, money comes back to the bank. I've also found an article in Economic Times in 2007 that they won the last case and got back Rs 150 cr.
    So actually, they're doing themselves a dis-service by not highlighting this positive.


    1 decade ago

    "The Scam" is a comprehensive book by the same authors covering the Stan C issues in greater details.


    1 decade ago

    Thanks u cud connect STAN CHArt to its past. Recently, it had arranged funds to Air India n others providers have complained about it. in 1992 Big Bull scam if I recollect properly JPC made critical references, again to Air India n StanChart. A Recent IPO of a realty sector co., when I read RHP I shuddered to the references made to the criminal and civil cases, a long list and stil the issue not only got oversubscribed but is hitting new highs. All this can be managed. It is ur desire to manage it.

    ramesh b

    1 decade ago

    good one!warehouse of such skeletons
    getting full! sebi is busy in great fight with IRDA & poor MF distributors! bubble is certainly getting larger enough to burst in foreseeable future...


    1 decade ago

    Thanks for this write-up. I may have been an unwitting investor in the IDR, if I am eligible to invest as an individual.

    K B Patil

    1 decade ago

    From this and various other articles, it is clear that SEBI acts in a whimsical fashion. Its functions should be based on logic and the need to be transparent. Who should bell the cat when the cat turns out to be as slippery as an eel?

    India’s first free-trade warehousing zone to come up in May

    Arshiya International will start operating its first free-trade warehousing zone in Mumbai by 23rd May; its hubs at Khurja (near Delhi) and Nagpur are likely to be completed by the end of FY11

    India’s first free-trade warehousing zone (FTWZ) will be operational by 23 May 2010. Arshiya International, the logistics company developing this zone, will officially open its Mumbai FTWZ next month. Trial operations have already started at this site.

    “Some clients have already moved in, the trial run is going on right now. Some of our clients have started their material movement from various countries and also from various parts within the country. The entire material should come inside the (Mumbai) zone by the end of this month or latest by the start of May,” said Ajay Mittal, chairman and managing director, Arshiya International. “We would also start billing our customers from 23rd May,” he added.

    Arshiya International is developing the country’s first FTWZs in three locations—Mumbai, Khurja (near Delhi) and Nagpur.

    On the clients who will be using the zone, Mr Mittal said, “We have around18 clients for the 4.5 lakh sq ft developed in the initial construction which will be operational next month.”

    The company plans to develop a total 27 lakh sq ft of warehousing space in the Mumbai FTWZ, of which 4.5 lakh sq ft has been completed. The entire project in Mumbai is likely to be completed by the last quarter of the next fiscal.

    Mr Mittal added, “I expect decent revenues. Let us first prove (that) the model (will function). I see healthy revenues from our operations. More importantly, it will create integrated value for Arshiya International as a whole.”

    While the Mumbai FTWZ will be formally operational by 24th May, the Khurja FTWZ is likely to be operational by the end of 2010. “(The) Nagpur FTWZ is expected to be completed by the last quarter of FY11, Khurja should be operational before that,” said Mr Mittal. The Mumbai FTWZ was completed in six months. The construction work at Khurja has already started and the Nagpur FTWZ is likely to get approval soon.

    The company also plans a fourth FTWZ in southern India. “It should be between Chennai and Ennore ports, though the location is yet to be decided. On the eastern front, it is a wait-and-watch scenario as there is no satisfactory port available to cater to this zone,” Mr Mittal added.

    Going forward, the company is looking at a capital expenditure outlay of Rs7,000 crore from the current Rs2,500 crore to Rs2,700 crore. “These investments would be required to fund our expansion in the FTWZ arena, in phases,” said Mr Mittal.

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


    Private equity funds to focus on emerging sectors

    About 80% of investments by 2015 in healthcare, education and clean energy sectors are likely to be contributed by private equity funds, says a study

    Most investments in emerging sectors like healthcare, education and clean energy will come from private equity (PE) funds in the next five years, a study has said, reports PTI.

    About 80% of investments in healthcare, education and clean energy by 2015 are likely to be constituted by PE funds since these are the emerging sectors, according to a joint study released by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Deloitte.

    “The government has been laying substantial focus on building these sectors through public-private-partnership projects aimed at developing these areas,” said ASSOCHAM president Swati Piramal.

    In 2009, PE investment in the healthcare sector was to the tune of $148 million and is expected to increase substantially in the next few years.

    “Within healthcare, the most favoured areas for investments are diagnostic services, medical devices, hospital chains and wellness products,” the study said.

    Currently, the size of the Indian education sector is estimated at $40 billion. It is expected to touch the $68-billion mark in the next three years, of which private equity investments would be more than three-fourth.

    In the area of clean energy, there is a steady increase in the number of market players. Therefore, investments are expected to be more broad-based.

    Besides renewable energy generation, areas including waste water, waste management, energy infrastructure and energy efficiency would also attract private equity investments, said the study.

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


    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