SEBI lifts ban on 100 Tayal Group entities

The Securities and Exchange Board of India (SEBI) has withdrawn a ban against 100 Tayal Group entities, which had restricted them from accessing or dealing in the securities market for over two years now.

The revocation comes despite an investigation finding violations by 92 out of the 100 entities. But SEBI has recommended adjudication proceedings against them. Even as the proceedings would continue, the regulator said all the 100 entities are free to participate in the market.

According to an earlier SEBI order, the promoters had conveyed that they were reducing their shareholding in Bank of Rajasthan from 44.18% as of the quarter ended June 2007 to 28.61% as of the quarter ended December 2009 to comply with a Reserve Bank of India (RBI) directive to reduce stake.

However, they actually increased it to 55.01% through multi-layered transactions and front companies, SEBI noted in its March 2010 order. The order banned the 100 entities involved in the irregularity from the securities market. Subsequently, the Bank of Rajasthan was merged with ICICI Bank.

The fact that the RBI allowed the merger suggests that it did not consider the matter under investigation to be of serious nature, suggested the latest Sebi order. “…if the RBI itself had considered the conduct of the promoters extremely serious, then either it would not have allowed the merger or would have done so with required caveats for the promoters,” it said.

Second, SEBI has taken the view that since the wrongful disclosures did not lead genuine investors to trades that would eventually expose them to a much greater risk, it is not a very serious matter from a securities market perspective. The SEBI order has “noted that there is no allegation as to any price or volume manipulation by the promoters. Therefore, I (the author of the paper) am of the opinion that purely from a securities market point of view, the severity of the offence could be considered not very grave”.