Mumbai: The Securities Appellate Tribunal (SAT) on Monday turned down a Securities and Exchange Board of India (Sebi) order, which had penalized six merchant bankers over initial public offering (IPO) of rating company Credit Analysis and Research Ltd (CARE Rating) in 2012.
Sebi in an order in November 2014 had slapped a penalty of ₹ 1 crore on six merchant bankers, including Kotak Mahindra Capital Co. Ltd, DSP Merrill Lynch Ltd, Edelweiss Financial Services Ltd, ICICI Securities Ltd, IDBI Capital Market Services Ltd and SBI Capital Markets Ltd, for not making adequate disclosures in CARE’s IPO prospectus.
Sebi had held that the conditional exemption granted by Reserve Bank of India (RBI) to non-resident investors to participate in the IPO was not disclosed in the prospectus,which was a material information.
Also, the fact that the company wrote to RBI saying investments by foreign investors and non-resident investors would not be considered as foreign direct investment (FDI) was not disclosed.
SAT in the order held that provisions of Sebi Act on disclosures while going for an IPO provide that the prospectus should have all disclosures pertinent to investors. While, in the case of CARE IPO, the disclosures deemed to be required by Sebi pertained to investors that were not allowed to invest in the IPO.
“AO (adjudication officer) is not justified in holding that the appellants ought to have ensured disclosure of the (said) information,” said SAT in the order.
