Referring to Supreme Court’s order against the Sahara Group as a benchmark for cases of unauthorised raising of money from public, Sebi has barred seven persons and one company from the markets for ten years for their involvement in the estimated R1,500-crore ‘StockGuru’ fraud.
Besides, these entities would also have to refund the entire amount collected fraudulently from gullible investors, along with an interest of 15% per annum, Sebi said in an order after investigating the case.
The order follows a Sebi probe into complaints received by it regarding one Lokeshwar Dev and his accomplice Priyanka Dev, both of whom used several aliases, fraudulently raising more than R1,500 crore through sale of preference shares of a company named SGI Research & Analysis.
Names used by them included Ulhas Prabhakar Khaire and Raksha J Urs, Siddharth Jay and Maya Siddharth Marathe, Dr Raj and Priya Zaveri, Dr Rakesh Kumar and Prachi Maheshwari.
A Sebi probe into the case found that the fraudsters had tricked the investors into putting in their money with a promise of 18% dividend, although the real assured dividend was a minuscule 0.12%.
Besides, the money might have mostly been collected in cash to avoid any regulatory glare, as SGI’s bank account had entries for a total amount of just about R44 lakh towards subscription of its shares by 162 persons. However, this was enough for Sebi to enforce the norms that make any offer for subscription of shares or debentures to 50 or more persons a public issue, thus making it mandatory to seek Sebi’s approval for any such offer.
Passing the order, Sebi’s whole-time member Rajeev Agarwal said the Supreme Court order of August 31, 2012, in the Sahara case has “held that an offer to fifty or more persons becomes public issue” by virtue of the relevant provisions of the Companies Act and needs compulsory listing.
Two Sahara Group companies were asked by the Supreme Court to refund the money collected from investors through certain convertible debentures, after the firms approached the apex court against a Sebi order in this regard.
“In the present (StockGuru) case, convertible preference shares were offered and issued to more than 49 persons” and therefore it qualifies as a public offer, he said, adding that SGI offered ‘specified securities’ to public but did not comply with the applicable Sebi Regulations and Companies Act.
Agarwal further noted that it is a settled position, in view of the Supreme Court order in Sahara case, that the power to administer proceedings in cases of public issue of shares or debentures lies with Sebi.
Sebi’s investigations found that SGI had invited investors to subscribe to its convertible preference shares through its office in Delhi, its agents and representatives, associate concern ‘stockguru.india’ and its website.
Sebi said that “these securities were of face value R10 each and were offered and subscribed at an exorbitant premium of R1,500 per share”. However, the promised dividend of 18% was found to be on face value of R10 and not on exact per share price of R1,510.
“In other words, subscribers were promised dividend of R1.80 on investment of R1,510 (which translates into 0.119% real dividend). Further, there was no reference of redemption premium to be paid to the subscribers,” Sebi said. “There was no economic justification of payment of so high premium with minuscule dividend...”it added.