The Securities and Exchange Board of India (Sebi) has widened the probe of registrar and transfer agents (RTAs) after it found huge irregularities in the case of Sharepro Services (India) converting physical shares into demat format.
The market regulator has registered a complaint with the Economic Offences Wing (EOW) of the Mumbai Police after it came to light that Sharepro, an RTA, did not take proper consent of an original investor while converting physical shares into demat form in the name of people related to Sharepro. EOW is keeping an eye on the racket which indulged in trading of physical shares and converting them into demat form with the help of the RTA.
As per sources, EOW has got information about the racket operating from major cities of Mumbai, Kolkata, Indore and Ahmedabad. The racket involves in buying physical shares on discount and converting them into demat form with the help of RTAs.
Sebi has imposed an interim ban on share transfer agent Sharepro Services (India), its promoters and other related entities after finding serious lapses in share transfer and dividend encashment services offered by Sharepro in certain cases.
Sebi has registered a complaint against Sharepro officials involved in converting physical share into demat form without taking permission of the original shareholder. After the primary investigation, Sebi has found several irregularities in dealing of physical share of six companies including Tata Communications, Aptech, J M Financial, Navin Fluorine International, Kansai Nerolac and Philips India. More than Rs one crore worth of physical shares were converted into demat form in the name of Sharepro-related proxy person without taking the consent of the original shareholder.
Sources said, "Sharepro top official Govind Raj and Indira Karkeyra were indulged in wrongdoings. They identified physical shareholders who have not been responding for around six years. Not responding means there is no response of dividend, company communication and bonus issue during last few years. So, Sharepro officials tried to find people with similar age as a proxy and registered a complaint of lost shares in local police station.
After that, RTA forged signatures on transferring paper, using personal information of original shareholder."
Sources said the total amount of forged shares will go up in the coming days as investigations proceed.
The EOW has arrested Goving Raj Rao and Indira Karkera third time in last three months in the case of cheating and forgery.
Meanwhile, Sebi has started investigation of all RTAs. In NSDL, around 95 RTAs are listed while the number is 135 for CDSL. The regulator wants to know whether these RTAs are doing proper due diligence during the time of transferring shares from physical form to demat format. "We are investigating all registrar and transfer agents and find out whether they have done proper due dilengence or not at the time of converting share from physical into demat format," a source said.
Sebi's action on the share transfer agents comes after Britannia Industries, Asian Paints and Aptech filed complaints with the police this month alleging fraud on the part of the transfer agent. The companies have disclosed this action to the stock exchanges as well.
The registrar and 15 other entities are facing an interim ban order for allegedly indulging in fraud, under the Prevention of Fraudulent and Unfair Trade Practices.
