The Satyam scam has had the effect of galvanising the government and capital market regulator into tightening  measures against 'fraudulent siphoning' of funds through initial public offerings.

According to reports companies that raised public money between 2004 and 2007 are now being investigated for possible diversion of funds to purposes other than stated through IPOs.

The move, it has been clarified, is not intended to initiate a witchhunt and the exercise is also not a knee-jerk reaction to the Satyam scandal. The move is aimed at ensuring that the funds raised are being used for the stated purposes; it is not to hound the private sector according to sources.

The exercise assumes significance in the backdrop of the massive amount of funds raised with Rs45,000 crore raised in 2007 alone; the funds raised thru 2004 thru 2007 would be much higher.

The markets, under the period were enjoying a bull run and major public issues had hit the streets including Reliance Petroleum, TCS, Patni Computers, Biocon, NDTV, IndiaBulls and many others.

According reports, the regional Registrar of Companies (RoCs) have been tasked to look into the annual filings and records of companies to check for violations or fraudulent diversion of funds. Sources say that statements would be scrutinised and inc case of any discrepancies companies would be asked to provide further details and an inquiry would be launched if required. Real estate companies could be leading actors in the exercise, it is believed.

While SEBI is exepected  to scrutinise the quarterly filings of companies, the RoCs will scrutinise annual filings like balance sheets along with other financial documents. However, companies that have delayed their planned investments because of the economic meltdown would be dealt with considerately it is learnt.

According to sources, they only intervene on suspicions of fraudulent diversion of siphoning of funds. However, they are fully aware of the economic slowdown and the recession that may have prompted some companies to delay funds deployment, in which case it will not be treated as a fraud, they add.

According to officials, hoarding the cash within the firm till the time is ripe does not amount to fraud, however, if the funds are diverted to shady deals in the real estate it is a fraud. The Satyam scandal has led to suspicions among investors that the firms may have played the real estate market instead of deploying the funds for the stated purposes.

The government's move is intended to ensure that public money is used for economic development.

Meanwhile SEBI has introduced a slew of measures to regulate stock market transactions:

It has now been made mandatory for promoters to disclose pledged shares in the light of revelations that IT firm Satyam Computer has pledged all its promoter shares with lender and a large portion of the same had been sold.

The SEBI board, in its 21 January meeting  decided that such disclosures should be made as and when the shares are pledged and also by way of periodic disclosures.

The regulator has also mandated pledging and release or sale of pledged shares should be made to the company. The company, it turn would inform the public through the stock exchanges.

Under the new regulations approved by SEBI chairman C B Bhave and the regulator board, it has been made mandatory for the promoters of a company to disclose details of shares pledged by them to the firm, within seven working days of commencement of the amended regulations.

The new regulations have came into force following their publication in the government of India Gazette on 28 January.

Listed companies are now required to declare their dividend on a per share basis only. The timline for bonus issues has been shortened.

The time frame for announcing the price band for IPO has been reduced.

It has been decided that the DIP guidelines would be amended to increase the upfront margin to be paid by allottees of warrants to 25 per cent.

Besides Satyam, companies that have disclosed share pledging by their promoters include Pyramid Saimira, Rolta India, Godrej Consumer, Mindtree, Asian Paints and Temptation Foods.