Sebi bans Sharepro in share transfer scam

Capital market regulator says company officials siphoned off shares, dividends from rightful investors

Capital market regulator Securities and Exchange Board of India (Sebi) has barred Sharepro and 15 of its officials, including its managing director GR Rao, for alleged siphoning off of dividends and shares from rightful investors.

According to Sebi, serious lapses at the registrar and transfer agent saw Indira Karkera, vice-president of the company and related entities, siphon off at least Rs 21 crore belonging to investors.

Given the seriousness of the issue, Sebi passed an ex parte order on Tuesday, following complaints by at least three companies including Britannia Industries, Asian Paints and Aptech.

However, in what could be a widespread scam, Sebi has also asked all listed companies which are clients of Sharepro to conduct a thorough audit of records for the last 10 years. The market regulator has also advised companies to switchover to another registrar enrolled with the regulator.

“Companies who are clients of Sharepro are directed to conduct a thorough audit of records and systems of Sharepro with respect to dividends paid and transfer of securities to determine whether dividends have been paid to actual/beneficial holders and whether securities have been transferred as per the provisions of law. This audit should cover the dividends paid/transfers effected within the preceding at least 10 years,” Rajiv Agarwal, whole-time member, Sebi wrote in an order.

Sebi’s preliminary findings show, between 2005 and 2015, at least Rs 21 crore were transferred illegally to entities related on Karkera.

“Dividends were paid to the original shareholders but the verification of the bank accounts revealed that the dividends were paid to persons who were not the rightful shareholders or were not at all the shareholders of the companies,” Sebi order said.

Sebi has directed that audit be completed within three months. Companies will have to submit the report to Sebi and take “appropriate action, in cases where violations are observed, in accordance with the provisions of law and inform Sebi accordingly.”

The move comes after the Mumbai Police’s economic offence wing (EOW) filed a criminal complaint against Sharepro on the alleged irregularities in transfer of shares and encashment of dividends claimed by Asian Paints.

In an announcement to stock exchanges, Britannia Industries, Asian Paints and Aptech have said they had terminated their agreements with Sharepro.

“Sharepro has not maintained the high standard of integrity in the conduct of its business and has not fulfilled its obligations in a prompt, ethical and professional manner,” Sebi order said.

The share folio in the system of Sharepro was transferred from the name of one shareholder to another, who is linked to Karkera. Such cases include Karkera’s brother, husband, brother-in-law, husband’s driver, etc. It was also noticed that share transferred just as a rectification entry (not as transfer, transmission, buy or sell entry) from the folio of one shareholder to another who is linked to Karkera. Shares transferred without appropriate documents reflect in Sharepro’s software.

CRACKING THE WHIP

• Sharepro officials allegedly forged documents, manipulated systems
   
• Sebi says lack of checks and balances at Sharepro
   
• No proper record of unpaid dividends kept
  

 

Falsification of records to avoid trail
 

Sebi asks Sharepro’s clients to conduct audit for last 10 years
 

Sebi asks these clients to switch over to other registrars