The Hindu Business Line : Fictitious demat a/cs opened in 2003 itself

The charges
DPs have been accused by SEBI of not fully implementing the `maker-checker' concept, data entry errors, scanning of officials' signatures, and appointing themselves as the second holder.

Mumbai , April 28

Some of the demat accounts that were used to manipulate allotments in the initial public offer of Yes Bank and IDFC were opened during 2003, and not in the last year as was earlier believed. The first IPO in which the key operators have participated was that of Maruti Udyog Ltd, in June 2003, though the number of fictitious demat accounts were not very high then, the interim order from Securities and Exchange Board of India has said.

SEBI's investigations have now pegged that a "total of 24 key operators have indulged in abusive practices in respect of 21 IPOs".

The evidence against Karvy DP has stemmed from the fact that almost all the demat accounts which served as conduits for these master account holders were held with Karvy DP, according to the order. These 24 operators have 34 demat accounts, of which 16 demat accounts are held with Karvy DP.

Due diligence not taken

The market regulator's investigations have pointed out that, while opening demat accounts the depository participants were not exercising due diligence. Persons involved in the scam have collected proofs of identity and addresses from groups of persons and used this to open bogus bank accounts.

Inter-linkages

The master account holders were found to have made off-market transfer of the IPO shares to various common groups of entities who appear to be their principals. It is seen that some of the master account holders have also made off-market transfers amongst themselves. This shows that there are inter-linkages amongst the master account holders as well as between groups of master account holders and their principals, the order said.

Depository participants have been accused by SEBI of not fully implementing the `maker-checker' concept, data entry errors, scanning of officials' signatures, and appointing themselves as the second holder.

With some of the DPs also acting as brokers, stock exchanges have been advised to examine the role and involvement of brokers and sub-brokers by way of participation in IPOs either directly or indirectly and their dealings in the shares subsequent to listing. Exchanges are to submit a report on this within a month.

Related Stories:
SEBI bars Karvy, 23 other entities

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