SEBI turns heat off Indiabulls for now | india | Hindustan Times
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SEBI turns heat off Indiabulls for now

SBI had barred 24 market players from trading in the capital market for their involvement in multi-crore IPO scam.

india Updated: Apr 28, 2006 22:41 IST

A day after it barred 24 market players from trading in the capital market for involvement in the multi-crore IPO scam, SEBI on Friday gave temporary relief to one of them - Indiabulls Financial Services.

The regulator kept the ban on Indiabulls in abeyance pending verification of clients' accounts - a decision that helped the stock market shrug off initial panic over the ban and recover the 491 points it had lost during the day.

SEBI, however, said investigation into the scam was on. "Nothing (investigation) is over. If new facts emerge, we are open to investigation," SEBI Chairman M Damodaran said.

Karvy Stock Broking Ltd, which is facing the regulator's heat for having handled 95 per cent of the fictitious accounts created for cornering the retail quota in IPOs between 2003- 05, termed the ban as "very harsh."

But Indiabulls, in whose credit services business steel tycoon LN Mittal picked 8.2 per cent stake last month, was the first to approach the regulator, challenging the ban.

In its submission, the company said, "Indiabulls Securities Ltd or any of its group companies had absolutely no role in either the IPO application of these 559 clients or any economic interest or any other interest whatsoever in the sale proceeds arising out of the sale of 13,939 shares or any financing of any of the IPO applications of the 559 clients."

Indiabulls was the first to approach the regulator, Damodaran said, adding the affected brokers have 15 days time to respond to the interim order.

SEBI would not hesitate in hearing petitions from other aggrieved parties, if they approach us, he said.

Karvy, had closed 65,000 of its nearly 8 lakh accounts due to their suspicious nature, said: "We will...(be) filing our objections."

SEBI also offered relief to retail investors, saying transactions carried out by barred market players on behalf of their clients will not be affected by the ban.

It asked clients of the banned entities to switch over to other Depository Participants within 15 days.

The directions to the barred brokers not to buy, sell or deal in the securities market, including in IPOs, "would apply only in transactions in the proprietary accounts of brokers," Sebi said in its clarification, adding that clients of these market players will not be affected by the ban.

The regulator also said that DP transaction of clients would remain unaffected only for 15 days, by which time clients of Karvy DP and Pratik DP should switch over to another DP.

Besides the ban on the operators, the regulator barred 12 depository participants, including HDFC and IDBI, from opening fresh Demat accounts.

Probing the major scam involving public offers during 2003-05, including that of TCS, NTPC, Jet Airways, Yes Bank and IDFC, SEBI also asked RBI, stock market authorties, CBI and Income Tax department to pursue the issue.

In its 256-page interim order after going into abusive practices in 105 IPOs beginning with Maruti, SEBI said all those involved in the scams will be prosecuted.