Sebi hands out disgorged money back to investors

The Securities and Exchange Board of India (Sebi) today started disbursing the disgorged money recovered from those charged with manipulating the market to investors.

The market regulator identified around 12,74,736 unsuccessful IPO applicants to whom Rs 23.28 crore would be paid.

Finance Minister Pranab Mukherjee said this was the first time that manipulators were penalised, and the amount recovered was redistributed to those who were deprived of their gains.

“This event underscores the importance of investor protection even when we strive to develop the securities market… Besides, this is required to encourage retail participation to ensure greater depth of the market and promote the inclusive growth strategy of the government,” he said.

Sebi investigated certain irregularities in transactions in shares issued through 21 IPOs during 2003-2005. After an investigation, it directed some people not to buy, sell or deal in the securities market, including in IPOs, till further directions. It initiated proceedings against these persons to disgorge illegal gains and take appropriate action, including penalties.

A committee was set up under the chairmanship of former Supreme Court judge Justice DP Wadhwa to advise the procedure for identification of people who have been deprived in these 21 IPOs and the manner in which reallocation of shares to them should take place.

As many as 13,57,848 investors were identified as unsuccessful applicants in one or more of the 21 IPOs listed in the Wadhwa committee report. Over 83,000 investors were eligible for Rs 20 or less. Sebi decided against making disbursement to such investors to keep administrative costs down.

About 8,00,000 investors were eligible for a reallocation amount of more than Rs 20 but less than Rs 300. Sebi is making a total disbursement of Rs 9 crore to all these investors, thus covering 59 per cent of the identified investors eligible for reallocation.