Icici Dumps Apple For Violating Deal On Bonds

Apple Finance has been removed from the consortium of lead managers for all future retail issues of ICICI Ltd for violating the memorandum of understanding (MoU) between the lead managers and brokers of the issue.

"Apple Finance will not be represented in the lead management team anymore," said Madhabi Puri Buch, deputy general manager of ICICI Ltd. "However, we still look forward to their support as brokers," she added. Apple Finance has earlier managed six of ICICI's retail issues.

Buch said action had been taken against Apple after it was found to have been repeatedly violating the terms of the MoU "despite warnings from ICICI." The company, which is one of the joint lead managers for ICICI's retail issue that closed on September 10, has been found violating the terms of the MoU that lay down conditions with regard to passing on of commission, Buch said. There are a total of 14 lead managers for the issue.

The commission structure is graded according to the amount collected. Brokers and managers get 1.25 per cent of the amount allotted plus Rs 25 per valid application. Moreover, they get an additional amount from an undisclosed kitty for the lowest slab of up to 10 lakh. Managers to the issue are also given an additional fee. According to the MoU, the managers cannot pass on more than the percentage portion to the brokers or sub-brokers.

"We recognise that such market practices are entrenched and there are tremendous pressures to demonstrate performance. However, there is a need to take action to send a signal that we are serious on enforcing market discipline," she said. Rampant undercutting and unhealthy competition had led ICICI to draw up the concept of an MoU between the managers and brokers in August. The MoU had stated that the lead management fee will not be passed on by lead managers and not more than a certain percentage will be passed on by the brokers to sub brokers.