February 18, 2024
SEBI to Review Policies and Take Action Against IPO Malpractices
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SEBI to Review Policies and Take Action Against IPO Malpractices

SEBI to Review Policies and Take Action Against IPO Malpractices/ANI

SEBI to Review Policies and Take Action Against IPO Malpractices

Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), announced that the regulatory body is collecting evidence and data related to mule accounts and inflated initial public offering (IPO) applications. Speaking at an event organized by the Association of Investment Bankers of India (AIBI), Buch emphasized SEBI’s commitment to reviewing policies and taking enforcement action against malpractices.

“Mule accounts, we all know how those work. We are now getting evidence and data about it. We have to do something about it,” Buch stated. She highlighted the issue of submitting large applications with multiple banks, knowing they will get rejected, solely to inflate numbers.

SEBI defines a ‘mule account’ as a trading account effectively controlled by another person, whether or not the consideration for transactions is paid by the individual. Buch revealed that SEBI is witnessing a pattern of frequent names involved in malpractices related to IPO applications, such as submitting applications only to withdraw them later.

“In the interest of the investors, we will be required to review policy and take enforcement action in such cases. It’s our job to protect investors against those,” Buch asserted. While acknowledging the importance of a free market and belief in market forces, she emphasized the need for SEBI to intervene when malpractices affect investors’ interests.

Buch drew a parallel with the bond market, highlighting concerns and lack of appetite, while noting that the equity market still shows an appetite for higher-risk assets. She concluded that as long as investors are informed and there is a level playing field, SEBI aims not to hinder investors wishing to take risks.

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