SEBI calls it a game of 'opportunists'
SEBI investigation has found that almost all the fictitious demat accounts (for buying shares) were held through Karvy Stock Broking Ltd.india Updated: Apr 28, 2006 17:54 IST
A well-knit game played by rank opportunists consisting of financiers, intermediaries and some bank employees who minted money by cornering shares meant for retail investors in IPOs is what SEBI had to say about the multi-crore public issue scam.
Market regulator SEBI investigation has found that almost all the fictitious demat accounts (for buying shares) were held through Karvy Stock Broking Ltd, an arm of Karvy Group which has been banned from all kind of security operations.
The modus operandi was: letters from banks were received by Depository Participants towards proof of identity (POA) and proof of address (POA) for opening demat accounts, which was not verified by DPs, though Sebi mandates it for safety and integrity of the system.
"The thousands of entities in each of whose names separate dematerialised accounts and bank accounts had been opened and IPO applications made were merely name-lenders or non-existent," according to SEBI findings.
First, bank accounts were opened in the names of fictitious or benami entities which facilitated the fictitious account holders to open dematerialised accounts. The findings of SEBI were confirmed by the Reserve Bank.
Even the key persons or master account holders who had executed the game plan were merely intermediaries acting on behalf of financiers.
"These key persons and their financiers are not investors but mere rank opportunists, who seek to make a killing by disposing the IPO shares cornered by them on the date of listing.
The banks have also played their part by opening bank accounts and providing loan to these fictitious entities with the objective of earning fee incomes.