3 Investment Bankers Under Sebi Scrutiny for Inflating IPO Subscriptions

Madhabi Puri Buch, Chairman of the Securities and Exchange Board of India (SEBI), plans to take action against the three investment banks soon after they were discovered to be wrongfully influencing IPO subscriptions. The capital markets regulator announced on Friday, according to Madhabi Puri Buch, that three investment bankers often inflated subscriptions during share transactions. Buch also told the media that SEBI is investigating the three incidents, although she did not specify the nature of the probe or whether the Ipos were mainboard or SME.

Investment bankers increase subscription prices in plenty of ways, the most well-known of which is the use of fake PAN numbers in the application or the applying various applications from the same PAN to infiltrate subscription data. The exaggerated subscription data leaves investors questioning whether they ought to invest in the IPO or not. Many retail investors have lost money as a result of fake subscriptions, leading them to believe that this IPO must be good because so many people are applying for it.

The inflated subscription leads to the company being listed at a high market price that is not justified by its fundamentals, such as revenue and debt, among other things. People invest in the company hoping to make money as everyone else did through the IPO, but as soon as they read the fundamentals of the company, they begin selling the shares, resulting in a lower circuit of the stock in the market. She also added that there is a possibility of “inflating the IPO application numbers to give the impression of a large number of subscriptions” and that SEBI will present the advice in front of everyone soon after the investigation is done. 

According to SEBI, there is a pattern of investment bankers engaging in malpractice regularly for specific stocks under someone’s influence; SEBI will take action against them soon after receiving all of the information at hand.

Madhabi Puri Buch stated all of this at the AIBI annual convention at the Jio World Convention Center. AIBI stands for the Association of Investment Bankers of India. She made the statement about bankers in front of many business new channel anchors, such as Anil Sanghvai and other widely recognized Sundararaman R, MD and CEO, BSE Ltd., and other banker investors. Furthermore, the SEBI Chairperson stated that they have data on MULE ACCOUNTS as well. MULE ACCOUNTS are bogus accounts that fraudsters and criminals use to transfer money from one account to another.

Though SEBI has not revealed the names or details of the three investment bankers, they have stated that they will release documents, including proof and evidence, to the public shortly and will take harsh action against the bankers per the law.

Recently, SEBI has also established the T+3 day IPO regulation, which requires an IPO to be listed in the market within three working days of closing, i.e., if an IPO closes on Monday, it has to be listed on Thursday, making it T+3 days.