Sebi bars 239 players for misusing SME platform to launder money, evade taxes

The Securities and Exchange Board of India ( Sebi ) has barred 239 individuals and entities from accessing the securities market for misusing the small and medium enterprises(SME) trading platform of exchanges to launder money and to evade taxes.The regulator had noticed huge rise in the traded volumes and prices of four stocks — Eco Friendly Food Processing Park,Esteem Bio Organic Food Processing,Channel Nine Entertainment and HPC Biosciences which were listed on the SME segment of BSE during January 2013 to March 2013.On reviewing the financial statements of these companies it observed that their profit after tax(PAT) and earning price per share(EPS) had consistently decreased from financial year 2012-13 onwards,the period of sharp price rise in these four stocks.During this period, all these companies raised funds through series of preferential allotments. Later, they issued bonus shares. Consequent to the preferential allotments and bonus issues,the share capital of these companies increased manifold. Once the companies substantially increased their share capital base through preferential allotment and bonus issuances they came out with initial public offers in 2013.The regulator said it had observed during preliminary inquiry that a set of common entities were funding the IPO of all the four companies either through directly transferring the amount in the escrow account of the companies on behalf of certain IPO allottees or by transferring the amount to the concerned IPO Allottees'bank accounts, who, in turn, applied for the shares in IPO On analyzing the bank statement and KYCs of all the entities who funded these IPOs showed they were related to each other.Sebi said all the four companies collectively raised Rs 46.530000000 through their public offerings out of which Rs 30.060000000, about 64.60% of total IPO proceeds were transferred back to all the entities who had funded these IPOs either directly or through layering.The funding entities had cumulatively financed the subscribers in the four companies to the tune of Rs 17.620000000 and received back Rs 30.060000000 from them immediately after the IPOs.Sebi alleged major portion of the IPO proceeds were used for refunding the subscription monies to the funding entities rather than using the same for disclosed objects.Besides, the trading of connected entities by placing buy orders consistently in the four stocks above the last traded price indicate the design to manipulate the share price.