sebi:MO/20/IVD/11/03
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Facts / Headnote
Certificate of registration as merchant banker suspended for a period of two months, effective 3 weeks from date of order
Provisions invoked
- s. 11
- s. 15A
- s. 19
- s. 15H
- s. 15I
- s. 15J
- s. 67
Regulations
- Reg. 13
- Reg. 13(2)
- Reg. 6(a)
- Reg. 13(6)
- Reg. 18
- Reg. 39
Parties
- M/s Shriyam Broking Intermediary Ltd.
Holding
Shriyam violated Clause 2 of the Code of Conduct read with Regulation 13 of Merchant Bankers Regulations by failing to ensure fair allotment and proper dispatch of certificates, and its registration was suspended for two months; violation of Regulation 6(a) of FUTP Regulations, 1995 was not established.
Full text
5. The Offer for Sale of HTL for 59,90,250 shares representing 25% of the equity capital was offered by the promoter group during 27-30 October 1999 @ Rs.50/- per share. The offer for sale opened on 27th October 1999 and closed on 30th October 1999. Subsequently, the shares of HTL were listed on Pune Stock Exchange and Bangalore Stock Exchange and trading started on15th November,
6.2 As per the offer document, HTL (‘EASL’ at the time of offer for sale) had shown profit before tax of Rs. 45.53 lakhs for the year 1996-97, by not providing for a liability of Rs. 1.02 crs. This amount was payable as interest towards ICDs/unsecured loans, totaling to Rs. 5.79 crs availed from associate companies. Had this interest liability been provided for, HTL would have shown loss in the financial year 1996-97. Accordingly, the accounts of HTL were required to be recast in the offer document as per the format in Annexure “A” of SEBI clarification no. XIV dated 1st March, 1996 to the DIP Guidelines. It was alleged that lead manager had accepted the management’s perception that the recasting of accounts is not required instead of exercising independent professional judgment in the matter. It was therefore, alleged that the merchant acting as lead manager violated Clause 2 of the Code of Conduct for Merchant Bankers specified in Schedule III, read with Regulation 13 of SEBI (Merchant Bankers) Regulations, 1992.
elaborated earlier. Although 5,990,250 shares of HTL were offered to public as per the OD, the allotment of shares to the extent of 14.83% to Promoters / Directors has defeated the purpose of Rule 19 (2) (b) of the SCR Rules 1957, which requires that 25% of the company’s equity be offered to the public and that applications received in pursuance of such offer were allotted fairly. If the shares offered and allotted to the Promoters / Directors are excluded, the net offer of shares to the public is only 2,437,100 shares, constituting 10.71% of EASL’s equity.
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Source: SecMarx — sebi:MO/20/IVD/11/03. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.