Sebi clamps down on 162 shell firms

Marco Green
August 9, 2017

After the completion of the audits, if the exchanges do not find evidence that these companies indeed exist, they would be delisted.

In a communication sent to the BSE, the NSE and the Metropolitan Stock Exchange, the markets regulator has asked them to keep the 331 shares in stage four of the Graded Surveillance Mechanism (GSM) with immediate effect.Securities coming in stage four are permitted to trade only once a month under trade to trade category.

Following Sebi's order, the firms are restricted from regular trading with immediate effect, while their promoters can not sell shares until further notice.

SEBI advised exchanges to appoint an independent auditor to audit such listed firms and if need be conduct a forensic audit. "If any listed company out of the said list is already identified under any stage of GSM, it shall also be moved to GSM stage VI directly".

Stating that the order has taken both the industry and investors by surprise, Rajesh Narain Gupta, managing partner, SNG & Partners said that even if some of these companies are later found to be genuine, the latest SEBI order is a severe blow on their perception and valuation.

"Trading in these securities shall be permitted once amonth (first Monday of the month)", the communication said.

Besides, these entities would not be permitted to deal inany security on exchange platform and its holding in any depository account would be frozen till such delisting processis completed.

The Nifty slumped 136.8 points or 1.35 per cent from its intra-day high of 10,083.80 and hit a low of 9,947 before ending the session below its crucial support of 10K level mark.

The Government has given a list of 331 suspected shell companies to capital markets regulator Sebi as part of a crackdown on illegal offshore transfers of money and tax evasion.

Parsvnath said that it is not a shell company by any "stretch of imagination".

While at least 124 companies are believed to be under scanner for alleged tax evasion another 175 firms were being investigated by the Serious Fraud Investigation Office (SFIO). They added that they be taken off the list of shell companies, and indicated about seeking legal opinion on the matter. J Kumar Infraprojects said it is not a shell company and suspicion of the regulator is uncalled for. The directions issued by Sebi in terms of the letter under reference are completely uncalled for and is without any basis. "Besides, there has never been a occasion when our company has indulged in any kind of malpractices in stock market".

Similarly SQS India BFSI Ltd has expressed shock that it has been placed under the surveillance list even as it has been complying with all the norms under Companies Act and Sebi regulations.

Other reports by Click Lancashire

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