IPO scams: Chidambaram warns of severe action

Finance Minister P. Chidambaram has warned that "severe action" will be taken against those involved in allotment scams related to new public issues. He said the Government and the market regulator, SEBI, would not allow the system to be misused. Such scams would not take place in any of the forthcoming public issues. He was speaking here on Friday in response to questions about SEBI having unearthed a multiple demat account scam in the initial public offer (IPO) of the Infrastructure Development Finance Company (IDFC) on Thursday. It comes close on the heels of the Yes Bank IPO allotment scam, which was uncovered last month. Mr. Chidambaram told newspersons that all concerned were cautioned towards ensuring an abuse-free system when the new issues hit the market. Care was being taken for the new issues to be made scam-free. He said all agencies acting together would take "severe action" against those involved in a scam. He disclosed that the same set of players involved in the IDFC case was involved in the Yes Bank case. Four or five individuals, as well as some banks and depository participants, were responsible in both cases that, he said, resulted from a systemic deficiency. He said he did not accept a system which did not detect multiple accounts and that there was something wrong with the person who designed the system or the software. Regarding the coming new issues of and hra Bank and Bank of Baroda, Mr. Chidambaram said he had spoken to the persons concerned, issuers of and hra Bank and Bank of Baroda. He had also spoken to the SEBI Chairman and thus felt there was no need for concern about the new issues.