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An old “Talking your book” case
I note that in the course of investigation, it was observed that Rakesh Jhunjhunwala interacted extensively with the media and was recommending many stocks in public forums. Shri Jhunjunwalla had attended conference of investors and fund managers conducted at the Indian School of Business, Hyderabad. On examination of the transcript of the proceedings, it was found that Shri Jhunjunwalla had stated that he could get shares of NIIT at Rs.1000/- in 3 months time. This statement was made on 6.4.2002 and the price of the scrip at that time was around Rs.230/-. The RKJ Group had a holding of 5,13,565 shares as on 31.3.2002.
It was observed that immediately after the comments of Jhunjhunwala at the conference, the price of the scrip rose from Rs.230/- on 8.4.2002 to Rs.350/- on 18.4.2002. It was also noted that the shareholdings of the RKJ Group subsequent to the conference went upto 11,29,069 shares as on 1.7.2002.
It is alleged that the broker had made the statement while he held substantial position in the scrip of NIIT and with intention of raising the price.
In this regard, the group submitted that the conference organised by M/s. Capitalideasonline.com was a closed door conference and the general investing public were not invited nor did they have access to the proceedings in the conference till 3.6.2002. They further submitted that full disclosure was made regarding the scrips owned by Shri Rakesh Jhunjhunwala when he made the recommendation. In respect of the particular recommendation mentioned in the SCN, the group submitted that Shri Rakesh Jhunjhunwala had made the recommendation in view of the high leverage that NIIT had over the profits that they made and considering that the company would fetch a substantial price in the event of a strategic sale. They further submitted that in respect of the four scrips upon whose performance the recommendations were made, the price had actually gone down. The group also submitted that they were net buyers when the transcript of the proceedings of the conference were posted on the website and not net sellers as would be expected of a person who attempted to manipulate the price of the scrip through recommendations.
I note that stock brokers and other intermediaries who indulge in manipulation make recommendations based on performance of a scrip. A recommendation to purchase is made by such intermediaries when they wish to offload shares. Investors who believe in their recommendations purchase the shares they recommend thereby creating a demand and increasing the price of the shares. The intermediaries then sell their shares at an increased price. Similarly, when such intermediaries want to buy shares, they recommend sale so that the price of the scrip falls owing to sell pressure and these intermediaries then pick up the shares at a reduced price.
I find that the submissions made by RKJ Group are acceptable and effectively address the allegation of price manipulation through the recommendations made by Shri Rakesh Jhunjhunwala. The recommendation made by Shri Jhunjhunwala was to purchase the shares and they were not net sellers. Rather they were net buyers after the recommendation was made.-from SEBI
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How online tipsters defraud investors
One of my readers wrote to me about an online tipster which has an interesting business model.
The promoters of this entity have opened half a dozen companies with some alluring names.If you Google “stock tips”, most of the top listed ranking/sponsored ads will belong to this entity
All the group companies advertise aggressively online using phrases such as “99% accuracy in our stock tips”/”Earn 25000-40000 Rs daily” etc.They charge exorbitant amounts for their stock tips which can range from Rs.10000-Rs25000 per month
An innocent investor/trader gets taken in by these ads and subscribes to one of the companies (say Company A).Now, these packages work in such a manner that if the investor is lucky he will hit the price target else he will hit the stop loss.Either ways, Company A has made its money.
After a while, the investor loses his shirt and stops subscribing to company A’s packages.But he still remains a sucker for stock tips.So again he Googles for “advisory” companies and this time joins Company B (which unknown to him is a related group entity of Company A !!).And then the sad story repeats itself !
Now, these tipsters have adopted an interesting business model.They have approached brokers in tier 2/tier 3 cities and have asked them to recommend their advisory services to their clients.The broker’s commission for doing so?A full 25% of the subscription fees !!
I am amazed that SEBI has not stepped in to stop these kind of schemes which are making bogus claims and duping investors.
Jago SEBI Jago !!
I had posted yesterday about the problems faced by senior citizens due to paper shares.
An 80+ investor wrote to Karvy registrar for the issuance of duplicate share certificates for splitted shares.
Here is what Karvy wrote to him:
From: “anitha.puttigari@karvy.com” <anitha.puttigari@karvy.com>
To: gopaldas_bkn@yahoo.com
Cc: bhanutej.patil@in.abb.com; b.gururaj@in.abb.com; karthikeyan.ea@in.abb.com
Sent: Tuesday, October 9, 2012 12:46 PM
Subject: Splitte Shares
Sir,
With reference to your email, kindly send us the following documents for issuance of duplicate share certificate of Rs.10/-.
** Certificate Details **
========================================
Sno Cert_No Shares Dist_From – Dist_To
—————————————————————-
1 26038-26039 20 7723695 – 7723714
2 17555-17556 13 12457420 – 12457432
3 31613-31614 11 24505636 – 24505646
4 251323-251327 14 37293605 – 37293618
—————————————————————–
========================================
Sno Cert_No Shares Dist_From – Dist_To
—————————————————————-
1 26038-26039 20 7723695 – 7723714
2 17555-17556 13 12457420 – 12457432
3 31613-31614 11 24505636 – 24505646
4 251323-251327 14 37293605 – 37293618
—————————————————————–
1. Lodge a complaint with Police Station and submit a copy of FIR (mentioning share certificate no(s) , unit name, folio no. distinctive no(s) and no. of lost of shares) in original or attested having clear impression of rubber stamp of the concerned Police Station, ( in case of copy thereof please note that it should be duly attested by first class magistrate or Notary) or acknowledged Police complaint. In case of complaint /FIR is in regional language, then a copy of the true translation of the same in English duly notarized by a Notary Public should be submitted along with the FIR.
2. Execute Indemnity & Affidavit on a non –judicial stamp paper of the value of Rs.200/- & Rs.100/- duly attested by Notary Public/Special Executive Magistrate respectively as per the proforma enclosed. Affidavit should be attested by notary with appropriate notarial stamps affixed together with the seal the registration no of the notary.
3. Stamp paper must be purchased only in the name of the executor i.e. , registered shareholder.
4. Questionnaire Form to be filled in by applicant(s) for issue of Duplicate Certificate(s) in respect of security/ies for which original certificate(s) are lost.
5. Proof of identity like Pan card/Passport/Driving License of surety duly attested by Notary required.
6. Supporting documents of surety like salary certificate/pay slip or copy of latest Assessment Order passed by Income Tax authorities or Proposed valuation Report issued by Revenue Authorities/Municipal Authorities/Secretary of Gram Panchayat duly attested by a Notary/Gazetted officer. Please note that Income of surety should be more than present market value of shares.
7. Full name, address and signatures of the witnesses and sureties should appear in the indemnity bond. Surety form to be filled by same person who has signed as surety on the Indemnity.
8. Any correction/modification on these documents needs initials of the executors.
9. All the particular of the shares like folio no., certificate no. and distinctive numbers to be mentioned in the Indemnity and Affidavit.
10. Photo copy of shareholder’s Pan Card duly attested by not
11. Share holder’s Proof of residence like Electricity Bill/Telephone Bill/Water Bill/Pass Port/Driving License duly attested by notary/gazetted officer
12. Share holders latest Bank statement in original / copy of pass book
13. Share holders specimen signatures duly attested by their Bank Manager on Banks letter head mentioning the bank manager’s name, address and telephone numbers. This certificate should also show your account number with the attesting authority as proforma enclosed.
14. Demand Draft amounting Rs.1000.00 in favour of ABB LIMITED payable at BANGALORE towards advertisement charges.
15. Request letter duly signed by you for issue of duplicate share certificate(s).
On receipt of the same we shall do the needful
Regards
Anitha
Now, if this is not an email from hell, then what is?Does any body expect senior citizens to run pillar to post fulfilling all these formalities?
To be fair,Karvy is probably following the law of the land in its response.But shouldn’t SEBI step in to ease the pain of elderly investors.A simple indemnity from the investors should suffice to issue duplicate certificates.
JAGO SEBI JAGO !!
Many senior citizens own shares in the physical form and have tremendous problems on account of this.
As this article by Flame puts it succinctly,
Currently, many investors—especially senior citizens—who have physical shares are finding it difficult to convert them into demat form. These investors are also struggling to claim their bonus shares and split shares issued by their respective companies. A large number of investors still hold shares in physical form.
Most of these shares were purchased by investors as long term investment. Also, they didn’t intend to trade or sell their shares. Hence these investors didn’t convert their shares to demat form and pay for demat or annual maintenance charges of depository participants.
For these investors, bonus shares, rights or splits are issued in physical form. Investors often complain that the bonus, rights or split shares are lost in transit after the companies claim to have mailed them. When that happens, the process of getting duplicate share certificates is very tedious and complicated. The investor has to a lodge an FIR (first information report) along with many documents since there are chances that the share certificate would be misused—leading to a financial loss.
Heena Thakkar, a Mumbai-based investor—who had lost her physical share certificates recently—said, “To obtain duplicate share certificates, an investor has to prepare an affidavit, surety and indemnity bond agreement. The investor needs to publish a general notice in a government gazette declaring the loss of share certificates. The cost of the publication of the general notice is normally borne by the shareholder.”
Taking up cudgels on behalf of such investors is Mr.Goverdhan Binani from Bikaner.Mr.Binani is himself a senior citizen and has written to SEBI chairman UK Sinha.
The email is reproduced below:
From: Goverdhan Binani <gd_binani@yahoo.com>
To: Mr.U K SINHA <chairman@sebi.gov.in>
Sent: Saturday, November 17, 2012 12:01 PM
Subject: Request to consider sympathetically the proposal being submitted herewith
Dear Sir,Subject: Pl. extend your support to senior citizen / investors
As we all know presently – very small quantity of issued shares in old companies are still held in physical form mostly i.e. 95% by senior investors [ due to age ] which they got either due to IPO / FPO allotment OR on buying from the secondary market in their early age ] and due to so many reasons these could not be converted into electronic mode i.e dematerialised.In order to minimise further issue of physical shares to these small retail shareholders SEBI should make it mandatory for co. who intends to issue Bonus shares or shares arising due to merger / demerger / amalgamation / split / consolidation etc.etc.to obtain consent by inviting / forwarding suitable format with a choice to furnish their demat a/c details within working fifteen days [ i.e. excluding holidays ] of receipt either over email or submitting hard copy.Further as every one knows there are very few companies who call back physical shares at the time of issuing shares due to split,amalgamation,merger or demerger whereas mostly issue without calling back physical shares and in both the cases old scrips become non tradable and requires to be destroyed. In first scenario there are numerous example where these old guys suffer when they fail to surrender their holdings as duplicate issue norms is not only time consuming but also cumbersome.To lodge an FIR is not an easy job for lay investors and especially for senior citizens who don’t have the stamina to follow the lengthy process of getting the duplicate scrips.This is highly tiring for senior citizens.In view of above pl.consider to rectify the present process replacing with a simple investor friendly process i.e. scrips should be released only on execution of an indemnity bond as this method certainly not only help these old guys but also help in reducing physical shares from market holding – as now a days SEBI is not permitting companies to issue shares in physical mode except ag. right,Bonus and on merger/demerger /amalgamation – that is also only to those who hold physical holding.Further due to amendment in clause 5A of the Equity Listing Agreement for dealing with unclaimed shares in physical form – it is requested to pay your sympathetic consideration and extend your active support so that it gets implemented without any further delay which in turn will provide a great relief to these senior investors [ citizens ].Awaiting your action taken response.G D BinaniBIKANER
More than 3 months has passed and Mr.Binani has not got a reply from the Chairman’s office.
Mr.Sinha, how will you get increased retail participation when genuine concerns of retail investors are not addressed?