Sebi asks bourses to verify financials of 331 ‘ shell’ firms
SOFTENING STAND Tax returns for past 3 years also under scanner
MUMBAI: Two days after asking stock exchanges to act against 331 listed entities suspected to be shell companies, the market regulator seemingly softened its stance on Wednesday, giving the firm san opportunity to be heard.
The Securities and Exchange Board of India( Se bi) issued a second communique to the exchanges, asking them to look at the tax returns and financials of the companies for the past three years, two persons with direct knowledge of the matter said on condition of anonymity.
Exchanges were directed to seek documents from the companies and hear them out, said the first person.
“If the verification does not throw up red flags, exchanges will report the same to Se bi. If the financials throw up concerns, then the companies will undergo an audit and other steps mentioned in August 7 circular,” said the second person. “This is more on the lines of Sebi giving exchanges steps that need to be followed,” this person added.
A statement from NSE said only 48 of the 331 firms flagged by the regulator were listed on the bourse.
“Sebi has asked NSE to seek documents from these 48 companies and verify the credentials and fundamentals of these companies. The exchange has already commenced the process of collecting information, as advised by Sebi and will be reporting to Sebi after completing the exercise,” the exchange said in an emailed statement.
BSE did not respond to an email seeking comment. An email sent to a Se bi spokesperson and a phone call was not answered.
Se bi acted after some of the 331 firms— 162 of which were actively traded and 169 had been suspended — protested against the regulator’s move, pointing to their operating and dividendpaying track record.
According to Monday night’s Se bi notification, the share soft he suspected shell companies will be traded only once a month until b ours es as certain whether these are genuine or structures meant for tax evasion.
Se bi’ s communique said it had based its decision on a letter from the ministry of corporate affairs identifying the 331 firms. It hasn’ t been clear how the ministry had shortlisted these firms.
“Firms which pass the tests will have a better standing in the market and amongst investors ,” said JN Gupta, co-founder and MD, Stakeholder Empowerment Services, a proxy advisory firm.