The Institute of Chartered Accountants of India (ICAI) may consider action against Haribhakti & Co, the internal auditor of Karvy Stock Broking Ltd, for failing to report multiple depository account opening for IPO scamsters.
The move comes after the Parliamentary Standing Committee on Finance recommending stringent action against Haribhakti.
Following this, the finance ministry had in December 2006 conveyed this recommendation to the ICAI and advised it to complete proceedings against the accountancy firm by not later than June 30, 2007.
In a follow up meeting, held on July 25, 2007, the ICAI assured the finance ministry that it would expedite the matter and bring it up at its Central Council meeting in September for taking a view on the matter.
Under the disciplinary mechanism of ICAI, after full verification of facts, if found guilty, we can terminate the accused persons certificate of practice and remove his name from our list of members, an ICAI official, who requested anonymity, said.
ICAI President Sunil Talati was not available for comment. ICAI asked us to clarify on the issue and we have clarified the matter. The institution has not taken any decision. We have followed all guidelines faithfully and have not done anything wrong, said Shailesh Haribhakti.
Securities and Exchange Board of India (Sebi) in an interim order on April 27, 2006 on the IPO scam during 2003-05, had blamed Haribhakti & Co for its failure to detect multiple account opening by Karvy Stock Broking.
According to Sebi, manipulators gained Rs 115.82 crore during 2003-05 by fraudulently cornering the shares meant for retail investors in IPOs of various companies like Yes Bank and IDFC.
Sebi has set up a committee, headed by a retired Supreme Court Judge, to advise it on the manner on which reallocation of shares would be done to genuine retail investors.
The IPO scam happened due to the failure of a few intermediaries to exercise due diligence and opened numerous demat accounts and bank accounts in fictious names without adhering to Know-Your-Customer norms.
Sebi and RBI have taken action against banks and market participants found guilty in the scam.