The Securities and Exchange Board of India (Sebi) today suspended the depository participant (DP) business of IndusInd Bank and Integrated Enterprises for 15 days. |
The capital market watchdog has found that both the entities failed in checking irregularities committed by DSQ Software in dematerialising excess shares in 2000. |
In two separate orders passed by its whole-time director G Anantharaman, Sebi said IndusInd Bank and Integrated Enterprises have failed in their responsibilities in checking "irregularities in the dematerialising of shares allotted, irregularities in the sale of shares allotted by several brokers and entities associated with the promoters of the company (DSQ Software)." |
The 15-day suspension on IndusInd Bank and Integrated Enterprises will be effective from September 1. The Sebi order, however, allowed the two entities to take instructions from beneficiary account holders during the suspension period. |
Chennai-headquartered DSQ Software is now non-operational and its promoter Dinesh Dalmia is under the custody of enforcement authorities for various violations in the securities market. Shares of DSQ was one of the favourites of rogue trader Ketan Parekh during that period. |
Sebi investigation found DSQ Software creating a trust `Softec Corporation' for its Employee Stock Option (Esop) scheme, into which one crore shares were fraudulently allotted in 2000-end period "without following the procedure under the Company Law." |
These shares were later sold in the market by entities associated with DSQ group - DSQ Holdings, Powerflow Holding and Hulda Properties without being listed on any stock exchanges. "These shares were delivered in the market knowingly that the shares did not have listing permission. Since the shares were issued under the same ISIN, it was considered as good delivery by investors because of distinctive numbers of the shares could not be traced in the dematerialised form," the order said. |
The Sebi order said that these shares were brought into the market by either delivering them directly or to pool account of brokers. |
"Though the DP must claim that they cannot be expected to know in advance whether the account would be misused or not, the point that is being stressed at this junction and for the purpose of this order, is that, had the DP followed the basic precaution in relation to the opening of new DP accounts as is brought out by Sebi rules," the order said. |