Share transfer agents have come under the Securities and Exchange Board of India's scanner after the market regulator received several complaints about their misconduct.
According to sources, Sebi started surveying STAs after it was found that some of them were continuing their operations even after their registrations expired. As per the law, any lending, borrowing, buying, selling or share transfer activity can be carried out only by "Sebi-approved intermediaries". This means that a registration certificate has to be obtained from Sebi to operate in the capital markets, and it has to be renewed at regular intervals.
In fact, in order to give a strong message to STAs violating Sebi laws, the regulator has dragged Calcutta-based AMI Computers to court for fraudulently operating as an STA. The appeal was filed by Sebi recently with the Additional Chief Metropolitan Magistrate in Mumbai.
Most of the Sebi cases are settled through consent or adjudication orders, and Sebi rarely initiates criminal proceedings that drag the erring party to court, where it could attract a jail term of up to 10 years or a fine, or both.
AMI Computers was banned by Sebi in October 2007 on charges of operating as an STA even after the required registration had expired for over a year. Criminal proceedings against AMI Computers and its directors Ratan Kumar Mishra, Kundal Mal Jain, V K Jain, Kundan Mal Banthia and G S Prasad were initiated by Sebi on persistent efforts by Right to Information Act activist Satish Chaudhary.
The fact that unregistered STAs were conducting their business in the markets came to light when Chaudhary first informed Sebi in 2007 about the fraudulent activities of AMI Computers, which was then acting as an STA to Mumbai-based firm Maikaal Fibres, as well as T&I Global and NICCO UCO Alliance Credit.
"When I wrote some letters to AMI Computers in 2007 seeking details on demat of Mikaal Fibres, there was no response from them. On making further inquiries, it was found that they were carrying out activities arbitrarily on their own, even after their registration as an STA had expired a year ago in September, 2006," Chaudhary said.
Under the RTI Act, Chaudhary had also sought to know the name of the Sebi officer who was then incharge of looking into the matter, and who should have been responsible for knowing that AMI Computers was still operating even a year after its registration had expired in 2006.
But the market regulator rejected the RTI application. An appeal in this regard has now been filed with the Chief Information Commission in New Delhi, which presides over RTI cases.
Meanwhile, the Mumbai police's Economic Offence Wing has also written to Sebi, asking for details about the case and the name of the Sebi official who was in charge of STA registrations and their renewals.