Markets watchdog the Securities and Exchange Board of India (Sebi) has initiated adjudication proceedings against the merchant bankers who handled the failed private placement of YES Bank shares in September 2016. According to sources, the regulator has prima facie found irregularities in the due-diligence process and disclosures during the run-up to the qualified institutional placement (QIP) of YES Bank’s shares.
To finalise the case, the market regulator has appointed an adjudicating officer who will examine the findings made by Sebi’s investigation team.
Sources said the investment banks will receive show-cause notices from the market regulator soon; they will be given up to 21 days to respond.
“Preliminary enquiry has been completed in the matter and we are following further procedure according to rules. These proceedings could be concluded within the next one year as mandated by the new Sebi rules,” said a regulatory official.
The issue was managed by 10 investment banks. Two investment bankers who handled the issue confirmed the development. “We have received some queries from Sebi regarding the QIP. The bone of contention was whether or not we followed the proper procedures in accordance with Listing Obligations and Disclosure Requirements and Issue of Capital and Disclosure Requirements. There are certain grey areas in the current regulations pertaining to QIPs and the case will rest on how the rules will be interpreted,” one of the bankers cited above said.
One of the important issues in the case was whether the bank had intimated the stock exchanges within the timeline prescribed under Sebi rules. YES Bank had informed the stock exchanges about the QIP on September 7 and had opened the QIP on September 8. According to Sebi guidelines, a listed entity has to intimate a stock exchange two days ahead of its fundraising by way of QIP, rights issue or preferential allotment. The pricing and allotment has to be done on the third working day.
Sources said, although the QIP was subscribed 1.1 times before the Indian markets opened on September 8, some investors withdrew their applications after the bank’s stock fell below the issue price.
“Some of the investors were mulling to purchase from the open market rather than subscribing to the issue. Hence, some investors who agreed to participate during the road shows backed off. Hence we had to withdraw the issue,” another banker said.
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