SC notice to Enam over Yes Bank IPO issue

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Jul 5 2012, 08:42am hrs
The Supreme Court on Wednesday sought reply from merchant banker Enam Securities as to why penalty of R25 lakh should not be imposed on it for its alleged failure to exercise due diligence, for not ensuring adequate disclosures in the public offer of Yes Bank in 2005 and also giving preferential treatment to certain institutional investors during allotment of shares.

A bench headed by chief justice SH Kapadia issued notice to Enam on capital market regulator Sebi's appeal against sectoral tribunal's order that set aside the fine imposed on the financial service provider for various irregularities.

Sebi on December 31, 2010, had found Enam guilty on three charges and had imposed penalty for violation of the provisions of Section 15HB of the Securities and Exchange Board of India Act, 1992 for its violation of provisions of Regulation 13 of Sebi' (Merchant Bankers) Regulations, 1992 and Sebi' (DIP) Guidelines, 2000.

However, the Securities Appellate Tribunal on February 15 while setting aside the penalty imposed by Sebi had absolved the local investment bank of any penalty for contravention/ non-compliance of the provisions of the DIP Guidelines.

The regulator, while examining the role of Enam Securities as a merchant banker, had carried out an inspection of its books and other documents from August 16-30, 2005 and observed that the bank had failed to disclose that Rabobank was a promoter of YES Bank in its initial public offer (IPO) prospectus.

According to Sebi', Enam had failed to exercise due diligence while making certain disclosures in relation to Rabobank International Holding B.V. ("Rabobank"), and failure to mention Rabobank as a promoter of Yes Bank in the prospectus for the Initial Public Offer of Yes Bank.

Attorney general GE Vahanvati argued that Enam had also failed in the assigned duties as post-issue lead manager to the public issues to redress investor grievances within the stipulated period. "For example, it was noted in the IPO of Bharti Shipyard Ltd, that out of the total 859 complaints pertaining to the issue, even eight months after the date of allotment, 35 investor complaints were still shown as pending," it added.