Sebi starts issuing showcause notices to 331 ‘shell’ companies

NEW DELHI: The Securities and Exchange Board of India (Sebi) has started issuing showcause notices to 331 listed firms, suspected to have acted as shell companies for those with illicit funds, while action has also started against more than 100 unlisted entities that could have traded in stocks with black money, people aware of the development said.

While Sebi’s decision on trading curbs has been reversed in case of some suspected shell companies after they approached the Securities Appellate Tribunal (SAT), it has been permitted to go ahead with its probe against them and others who could have violated securities laws.

While many of these firms have gone public to deny any wrongdoing and have said they are not shell companies, a top official said a wrong perception has got created about this nomenclature and even established and well-known firms can act as shell companies by providing a platform for money laundering.

While several small brokers are already in the list of “suspected shell companies”, their links to bigger brokerage groups are being probed by Sebi, another official said, requesting anonymity. Also under the scanner is the role of some stockbrokers in creating a “panic-like situation” in the stock market after Sebi’s action to restrict trading in shares of the 331 companies, he said.