Share price of Bank of Rajasthan (BoR) tumbled after a late Monday night interim ex-parte order by SEBI barred 100 promoter group entities from dealing in the market with immediate effect.
BoR shares fell 6.66 per cent to Rs 62.35 at the close of the day on the BSE, retracting from day's low of Rs 58.60 touched soon after the markets opened.
To protect investors and safeguard the integrity of the market, SEBI restrained promoters (controlled by the Tayal Group), the other Tayal entities, the Yadav Group and the Silvassa Group from dealing in the securities market. These entities along with the promoters of BoR had indulged in fraudulent and unfair trading in the shares of BoR, said the capital markets regulator.
It is prima facie established that the entities have acted in concert with the promoters of BoR with common objective of substantially acquiring share/ voting rights in BoR indirectly for the promoters for the purpose of camouflaging their acquisition, SEBI order said.
The nexus between the promoter group entities for disguising the ownership structure apparently superficially also resulted in compliance with RBI guidelines on ownership and shareholding. SEBI observed that this has to be referred to RBI for further action as they may deem fit.
The regulator also directed NSDL and CDSL to freeze the beneficial owner accounts of 18 of 100 entities whose PAN number couldn't be ascertained.
BSE and NSE were also directed to square off any existing open positions in the futures & options segment for all the 100 entities.
The role, if any, of the stock brokers R. R. Chokhani and Finquest Securities would need to be examined by the stock exchanges in allowing for such large scale market purchases of the shares of Bank of Rajasthan without conducting sufficient due diligence as to the source of funds for purchases made by the entities buying in their names.
SEBI observed that this is not the first instance that a few of these entities have been involved in investigations leading to regulatory actions.
SEBI had in September 2007 debarred some entities related to Tayal Group from dealing in the scrips of Jaybharat Textile & Real Estate Ltd and KSL & Industries Limited, both companies of the Tayal Group.
After RBI provided details of movement of funds from the Tayal Group to certain domestic corporates (front companies of the Tayal Group), SEBI investigations followed the trail of funds provided in by RBI.
According to the regulator, the disclosure by BoR promoters showed that their stake gradually came down from 44.18 per cent as at quarter ending June 2007 to 28.61 per cent as at quarter ending December 2009, which was clearly false.
This evidently conveyed a misleading picture to investors, stock exchanges and to SEBI, while the promoters did not dilute their controlling stake in BoR. On the contrary, they had raised their shareholding (to 60 per cent as of March-end 2008) in a deceptive and fraudulent manner with active connivance with others, the SEBI order said.
However, no disclosures related to the acquisitions were made to the bourses by any of the acquiring groups or by BoR at any time over this extended period.