The department is seriously reviewing the current Sebi pricing mechanism and introducing a valuation system for preferential allotment after several irregularities were found in such allotments. The valuation will be done by an individual valuer, DCA secretary Vinod Dhall said on the sidelines of National Accounting Convention organised by the Associated Chambers of Commerce and Industry of India (Assocham) on Saturday.
We have held preliminary discussion with Sebi on this issue. Sebi pricing norms stipulate the average price of last six months or last 15 days, whichever is higher. This leaves a lot of room for price manipulation and we need to amend the preferential allotment pricing norms, Mr Dhall said.
The changes being proposed also include determining to whom the allotment is made by corporates.
Preferential allotments were allowed to enable promoters to induct any new shareholder without the major expense of a public issue. But we have come across instances where such allotments have been made at prices significantly lower than prevailing market prices, not to shareholders but to brokers.
He said such allotments generally lead to a nexus between broker and company promoters so that the two can manipulate prices in the stock market.
DCA is also in the process of devising norms for audit committees of companies so that these become more responsible and effective internal bodies.
We need to increase the penalties imposed for accounting irregularities, and have greater powers to inspect and prosecute where necessary. These amendments need to be made in the Companies Act and we have begun consultations in this regard, he said.
Also on the anvil is random inspection of balance sheets being filed with the registrar of companies (ROC) to ensure that the disclosures made are adequate and accurate.
Besides, Mr Dhall said, the department is also examining the proposal whether it should be made binding on auditors to send accounting qualifications, if any, first to respective ROCs so that the latter can act immediately.