Six Investment Banks Under SEBI Scanner Over Malpractice In IPO Market?

New Delhi: Worried over alleged malpractice in the IPO market, the Securities and Exchange Board (SEBI) is reportedly probing six domestic investment banks. A Reuters report has alleged that the probes have started earlier this year on these banks that worked on offerings by small businesses.

The report, however, doesn’t identify its sources. It has claimed that the probe focuses on the fees that the banks have charged.

It has been alleged that at least half a dozen small investment banks have charged companies fees equivalent to 15% of funds raised via their IPO. This is a much higher share compared to the standard Indian practice of 1% to 3% in India.

Odishabytes, however, couldn’t independently verify such claims with SEBI. The market regulator had earlier warned investors about the dangers of investing in some small businesses. Reports claimed that there were plans for tighter IPO rules.

“SEBI’s preliminary findings suggest that the high fees are being charged to ensure the offerings are oversubscribed, according to one of the sources,” the report stated.

Such bids were apparently not genuine and cancelled at the time of allotment, but the high subscriptions attracted more bids and investments, according to sources quoted in the report.