Sebi probing mule accounts, faulty IPO applications, 3 cases under scanner, says Buch

SEBI Chairperson Madhabi Puri Buch (File pic)

Market regulator Securities and Exchange Board of India (Sebi) on January 19 said that it is looking into mule accounts and the practice of putting in faulty IPO applications to give an impression of high amount of subscription.

Sebi chairperson Madhabi Puri Buch said that they are probing three cases, but did not reveal the nature of investigation, nor did she say whether the cases are related to mainboard IPOs or SME IPOs.

"We are unhappy about the malpractices that we see. We can also see that there are certain merchant bankers, whose names often appear in such practices. We will need more data," she said.

Buch was speaking at AIBI Annual Convention 2023-24.

Also Read: 68% HNIs, 43% retail investors flip IPO trades in first week, says Sebi chair Madhabi Buch

Speaking about SME IPOs, she said, "The very fact that it is a separate board in both exchanges.. retail should recognise that the characteristics of the companies are different from the ones in mainboard."

"The value of putting it on a separate board is that we are making investors aware that the reporting, compliance and listing requirements are different and therefore there is a higher risk," she added.

In an earlier story, Moneycontrol had reported how SME IPOs were being rigged. Promoters, in collusion with operators, scour for IPO applicants who are willing to sell their applications and get compensated in two ways—either through "subject to" or through a fixed cost. Read about it here.

Buch also threw light on how some miscreants put in applications in a manner that it gets rejected, but the purpose of inflating subscription numbers and attracting retail investors is served.

This can be done by putting down wrong PAN numbers, or putting same PAN number in two applications, Moneycontrol has earlier reported.

Also Read: Investors in this SME IPO got full allotment despite oversubscription. Here’s what happened

Buch, however, did not disclose what action will be taken on those found guilty of malpractices in IPO markets. "Policy and enforcement action are two different things. It will be left to the person investigating the case," she said.