Mumbai: Capital markets regulator Securities and Exchange Board of India (Sebi) on Tuesday slapped an interim ban on share transfer agent Sharepro Services (India) Pvt. Ltd. After a preliminary probe, the regulator found serious lapses in the share transfer and dividend encashment services being offered by the company to some of India’s largest corporations.

At least three of them—Britannia Industries Ltd, Asian Paints Ltd and Aptech Ltd—have complained to law enforcement agencies over the past one month, citing irregularities in the services offered by Sharepro.

As per the Sebi order, which is based on a preliminary investigation, the registrar has defrauded no less than 10 companies for an estimated 22 crore. This is what the Sebi order tells us about the modus operandi of the alleged scam.

1. Dividend transfers: At the core of the irregularities found at Sharepro was a transfer of dividends to persons connected to the management of Sharepro. These dividends were not sent to their rightful owners. Instead bankers were instructed to release dividend payments to Satyam Brush Industries. Sebi found that Satyam Brush is owned by Prashant Karkera, husband of Indira Karkera. Indira Karkera is the vice-president and head of operations of Sharepro. In one such instance, dividends of Tata Communication worth nearly 14 lakh were transferred to Satyam Brush over a period of 7-10 years.

2) Circuitous transfers: To avoid detection, demand drafts (DD) were made in favour of original shareholders but later cancelled and then reissued in favour of Satyam Brush. “Such circuitous transfers were done to blur the audit trail and no record of such DDs issued, against DDs were maintained by the transfer agent," said the Sebi order passed late evening on Tuesday.

3) Tale of driver, brother, brother-in-law, husband and family members: Apart from Satyam Brush, there were many other recipients of such illegal transfers. There were a total of 797 instances involving more than 51,13,728 of alleged illegal transfers. Transfers were made to entities or persons linked to Indira Karkera, who later either withdrew the amount in cash or transferred the illegal proceeds to Indira Karkera’s family. These recipients included the driver of Prashant Karkera, brother and brother-in-law of Indira Karkera, apart from Satyam Brush.

4) Share transfer to person connected with management: Illegal dividend transfers were not the only wrongdoing found on the part of Sharepro. There were also illegal share transfers. In one such case involving Asian Paints, shares belonging to a deceased shareholder instead of being transferred to the nominee found their way into Jayshree Shah’s account. As per Sebi’s investigations, Jayshree, sister of Shrikant Bhalakia, is known to Indira Karkera. Sebi noted that this was an attempt to siphon off shares.

5) Share folio transfers from one name to another: In another instance, shares of Asian Paints belonging to a shareholder were transferred to a known associate of Indira Karkera, Shrikant Bhalakia, without informing the company. There was also no record of the said share transfer. Rectification error was used to siphon off shares.

6) Misusing authority: Sharepro also misused its authority of instructing bankers directly to issue dividend payment instruments to persons, who were not shareholders in the companies.