Securities and Exchange Board of India (Sebi) had found that Keynote as a book running lead manager to the IPO of Edserv Softsystems had failed to exercise due diligence by not including details of Inter-Corporate Deposits (ICDs) availed by the company in the prospectus, thereby violating market regulator's norms.
Accordingly, in January 2012 Sebi had slapped a penalty of Rs 10 lakh on Keynote, following which the entity had approached SAT challenging the regulator's ruling in the case.
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While upholding the penalty on Keynote, SAT in an order dated February 19 said that the responsibility of the entity "was major, since he plays the coordinating role in bringing out IPO and is conceived to be the one who certifies veracity and adequacy of all disclosures...".
It also "had the responsibility of bringing out all relevant facts and to ensure that no material information/fact is withheld ....And has authority to call for all relevant information from company seeking IPO and is expected to carry out due diligence to bring our truth and adequacy of information in IPO at all stages," SAT said.
"The penalty is, therefore, upheld and appeal against the impugned order is dismissed," it added.
Keynote had failed to mention in the prospectus of Edserv Softsystems that the company had taken ICDs of Rs 4 crore as result of which the investors could not make "informed decision" for investing in the IPO.
SAT noted that while the loss caused to investors "cannot be quantified" but it was "certain that investors, as a whole, incurred huge losses as a result of IPO".