'Intermediaries should be made more accountable'

Rina Pathak (name changed on request) had applied for an initial public offer of a company. When she didn't get the shares, she then applied for a refund.

The company directed her to the merchant bankers, who told her that another banker was in charge of the post-issue matters.

When she approached the other banker, she was told to go to the Registrar and Transfer Agent (RTA), who handle all the paperwork involving investor servicing. She never got through the red tape. Finally, she approached a local investor association to address her grievance.

Investor associations are now taking up cases where people have not got refunds from IPOs or have been allotted shares 3-4 years ago but are yet to see them.

The Securities and Exchange Board of India (Sebi) is mulling over proposals to reduce the time between issue closure and listing of shares from 21 days to 7-10 days.

This includes a proposal where money does not have to leave the investor's account when he applies for shares in an IPO. Once applicants are allotted shares, an equivalent amount is unlocked from their accounts electronically.

While the regulator's measure to speed up the primary market proceeds are well-intentioned, investor associations feel that the market intermediaries must be made accountable first.

"People don't want to pay extra money for this kind of facility (banks blocking money till allotment). They want the registrars or the issuer to incur these expenses," said AK Narayan, president of Chennai-based Tamil Nadu Investors' Association, a Sebi-recognised body.

"About 50-60 per cent of the problems will be solved once Sebi speeds up the process but it would help if there was a nodal agency to monitor all the problems investors face before or after the IPO. We could have an ombudsman appointed by the issuer who would look at these kind of problems. Market intermediaries should be more accountable," he added.

In a circular last month, the regulator clarified that Sebi had never mandated that investors must furnish a copy of the PAN card along with the bid/issue application in the primary market.

Several public issues before that saw collection centres/agents/syndicate/sub syndicate members/lead managers insist that applicants should attach copies of PAN card along with the application form.

The same circular also said that "complaints or comments received by Sebi regarding any offer documents filed with Sebi are forwarded to lead managers for redressal and for replying to complainant.

However, it is noted that in many cases, instead of the lead manager, the issuer company is responding to the complainant. The lead managers merely forwards a copy of the issuer's reply to complainant, to Sebi without adding any comments or with a mere statement that the reply is self explanatory. Merchant bankers are hereby advised to refrain from this practice."