SEBI introduces stricter norms to regulate markets

02 February 2009

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.