Market regulator Sebi on Friday imposed a penalty of Rs 1.50 crore on one Purshottam Budhwani for his alleged role in fraudulent trading practices in IPOs of 13 firms including Yes Bank and Suzlon Energy between 2003-2005.
Budhwani was also allegedly involved in manipulative activities related to Intial Public Offers (IPOs) of IL&FS, IDFC, Shoppers Stop, MSP Steel and Power, SPL Industries, Provogue, Tata Consultancy Services, Gateway Distriparks, Gokuldas Exports, Nectar Lifesciences, Sasken Communication Technologies.
Sebi said Budhwani acted as key operator in concert with certain other entities and was involved in the scheme of cornering of shares in the IPOs.
"...the noticee had indulged in fraudulent and manipulative activities and employed deceptive device and scheme to corner the shares reserved for retail individual investors in the aforesaid 13 IPOs with the intention to defraud retail individual investors," Sebi said in its order.
A Sebi probe in shares of certain companies during their IPOs between 2003 and 2005 had found that certain entities had opened large number of demat accounts and bank accounts which were in the names of fictitious persons or were benami.
The entities had purchased shares of various companies in the IPOs by making applications in fictitious names with each application being of a value so as to make it eligible for allotment under the retail category.
Following the allotment, the shares from such fictitious allottees were transferred in the demat account of key operators like Budhwani before the listing on stock exchanges, Sebi said.
The key operators then transferred the shares through off market deals to certain entities called the "financiers".
The regulator said it observed that the key operators retained a portion of shares for themselves which were then sold in the market, earning them huge gains illegally.
As per Sebi, the scheme was designed to corner shares from the quota reserved for retail investors in the IPOs of various companies and to make profit by selling the shares.
In May, 2011, Sebi had directed Budhwani to disgorge Rs 9,39 crore which included the amount of unlawful gains made by him along with an interest of 10 per cent per annum for six years.