Multi-agency Probe Look­ing into Af­fairs of Bol­ly­wood Cos, Real­tors and Bro­kers

The Economic Times - - Companies - Press Trust of In­dia

New Delhi: A ‘black money bon­homie’ has come un­der the scan­ner in­volv­ing builders, bro­kers and Bol­ly­wood en­ti­ties as a multi-agency probe gets un­der­way to pierce the cor­po­rate veil of hun­dreds of sus­pected shell com­pa­nies. The Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) has be­gun shoot­ing off show-cause no­tices to 331 listed en­ti­ties, sus­pected to have acted as 'shell com­pa­nies' for those with il­licit funds, while ac­tion has also be­gun against more than 100 un­listed en­ti­ties that could have traded in stocks with laun­dered money, top reg­u­la­tory and gov­ern­ment sources said.

While the cap­i­tal mar­ket reg­u­la­tor Sebi's de­ci­sion to re­strict share trad­ing has been re­versed in case of some firms after they ap­proached the Se­cu­ri­ties Ap­pel­late Tri­bunal, it has been per­mit­ted to go ahead with its probe against them and oth­ers who could have vi­o­lated se­cu­ri­ties laws. While many of these com­pa­nies 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 and con­vert­ing black money into white. While sev­eral small bro­kers are al­ready in the list of ' sus­pected shell firms', their links to big­ger bro­ker­age groups are be­ing probed by Sebi, an­other of­fi­cial said.

Also un­der the scan­ner is the role of some bro­kers in cre­at­ing a 'panic-like sit­u­a­tion' in the stock mar­ket after Sebi's ac­tion to re­strict trad­ing in shares of 331firms, he said, while adding that the move would have safe­guarded the in­ter­est of mi­nor­ity share­hold­ers but the bro­kers with their 'skin in the game' wanted to get their money out.

As Sebi con­tin­ues its probe, af­fairs of these com­pa­nies are also be­ing looked into by agen­cies such as I-T Depart­ment, ED and SFIO (Se­ri­ous Fraud In­ves­ti­ga­tion Of­fice) to un­ravel what one top reg­u­la­tory of­fi­cial de­scribed as a “big black money bon­homie”.

Sev­eral of these firms are also sus­pected to have in­dulged in huge cash deal­ings post-de­mon­eti­sa­tion. Mark­ing co­or­di­nated ef­forts on their parts, the reg­u­la­tory and in­ves­tiga­tive agen­cies are shar­ing their in­ves­ti­ga­tion re­ports with each other, the of­fi­cial said.

Cit­ing of­fi­cial doc­u­ments and pre­lim­i­nary probe find­ings, mul­ti­ple reg­u­la­tory and gov­ern­ment of­fi­cials said nearly 500 en­ti­ties (in­clud­ing listed and un­listed ones) are cur­rently be­ing probed but some of the names have not been made pub­lic yet due to the sen­si­tiv­ity of the mat­ter and to safe­guard the in­ves­ti­ga­tion process. Any ac­tion against such 'big names' would take place after the in­ves­ti­ga­tion has reached some con­clu­sive stage, they added. A large num­ber of com­pa­nies hav­ing acted as 'shell firms' are linked to busi­nesses like real es­tate, com­modi­ties and stock broking, films and tele­vi­sion (in­clud­ing those on dig­i­tal plat­forms), plan­ta­tion and non-bank­ing fi­nan­cial ser­vices, the of­fi­cials said.

“An­other wor­ry­ing trend is that sev­eral of these com­pa­nies, in­clud­ing listed ones, could have helped laun­der money col­lected il­le­gally by un­law­ful money-pool­ing schemes by groups al­ready barred by one or other reg­u­la­tor,” said one of the of­fi­cials who didn't want to be named as in­ves­ti­ga­tions are un­der­way. Also un­der the scan­ner is funds shown as for­eign or do­mes­tic 'pri­vate eq­uity in­vest­ment' by sus­pected 'shell firms'. The sus­pected firms are be­ing asked to ex­plain these links and all sus­pi­cious deal­ings.

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