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'Fit and proper' condition dogs SEBI promoter criterion

NetScribes/Salil Panchal & Janaki Krishnan

The Securities and Exchange Board of India (SEBI) is yet to arrive at a decision on whether individuals (and/or directors on board of companies) not considered "fit and proper" should be allowed to raise public money. The primary markets advisory committee, which met on November 9, was divided on the issue. SEBI is also concerned whether individuals having a criminal record should be allowed to tap the market.

SEBI chairman D R Mehta has taken the view that companies should disassociate themselves from such individuals before entering the market. However, the legal view in the regulatory body is that the issue should be allowed to go through, even with such persons on board, unless they have been proved to be guilty.

"Undesirable" persons associated with a company raising money from the public became an issue when the Tips Industries initial public offering hit the markets earlier this year. Ramesh Taurani, one of the promoters, is an accused in the Gulshan Kumar murder case.

The issue went through. SEBI maintains that adequate disclosures had been made in the prospectus. Also, the offer document was on the website for a fairly long time, allowing any objections to be registered, the regulator stated.

The primary markets committee, which met on November 9 to discuss this contentious issue, could not make any headway as there were differing opinions on the issue. The matter will be raised again at the Y H Malegam committee meeting where the members of the primary market committee would also be invited.

However, SEBI, conscious of its responsibilities towards the small investor, has decided to take up the matter in order to treat future cases in a uniform manner.

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