Sebi will create a history of sorts when finance minister Pranab Mukherjee distributes about Rs 25 crore of ill-gotten gains recovered from the IPO scam perpetrators to over 12 lakh retail investors here on Monday.
The money will be electronically credited to the bank accounts of the applicants who were deprived of their rightful allotment of shares in 21 IPOs between 2003 and 2005.
Sebi investigation had found 24 key operators, with 82 financiers as their accomplices, had cornered the shares in the 21 IPOs, including those of IDFC, Yes Bank and Sulzon Energy, through fictitious demat accounts. In November 2006, the regulator passed a ?disgorgement order? to recoup the money from these entities which made unlawful profits at the expense of genuine applicants.
Disgorgement is a universal remedy for breach of securities law, and is rooted in the principle of restitution. The idea is to get the wrongdoers cough up the ill-gotten gains, and disburse the same to those who would have been the beneficiaries had the wrong not been done.
Calling Monday?s disbursal ceremony as a very satisfying moment, a Sebi member told FE the regulator hoped to recover the entire profits?estimated at over Rs 100 crore–gorged by the wrongdoers in the next three years.
?Leave alone capital markets, this is perhaps one of the rare attempts by any regulator or agency in the country to adequately compensate a customer for the losses he suffered because of someone else?s wrong,? the official said.
?The process of recovery is on. We are taking up cases party-wise,? he said. The pace of the process is impacted in many cases, since the defendants have approached Securities Appellate Tribunal (SAT) and in some cases, even the Supreme Court.
In January this year, Dhaval Mehta, allegedly the brain behind the IPO scam moved the apex court challenging the SAT order that upheld SEBI?s decision to bar him from trading in securities market for two years.
The Sebi official drew a distinction between the key persons behind the scam and the market intermediaries?depositories and depository participants?saying that the intermediaries could only be penalised for their willful violation of Sebi norms, while the disgorgement order is principally aimed at those who enriched themselves by usurping shares which are someone else?s due.
?Disgorgement is aimed at preventing unjust enrichment and compensating those who have suffered as a result,? he said.
Lauding Sebi?s role in recouping the money, a senior finance ministry official said that ?as difficult as reaching the wrongdoers and finding evidence against them has been the process of identification of the intended beneficiaries.?
Monday (April 12), incidentally, is also the Sebi foundation day.