December 19, 2007
Thousands of retail investors in the primary market who suffered
potential losses due to manipulation in the initial public offering
allotment process of 21 companies two years ago can be compensated
monetarily.
A SEBI-mandated committee has recommended that individual investors,
who were short-changed in IPOs between 2003 and 2005, be compensated
in monetary terms. According to The Justice Wadhwa committee,
a compensation of Rs 92 crore should be granted to investors
who had applied for shares in the retail category in 21 IPOs
in 2005-06.
This is based on the closing price on the listing day for all
these IPOs, which include IDFC, Jet Airways and Suzlon.
The report also says that investors who lost out in these IPOs
should be paid the difference between the offer price and the
closing price on the listing day. This is considered to be the
unjust gain made by scamsters who cornered shares meant for
individual investors.
As per sources the report has recommended that the first to
be compensated should be retail investors, who failed to get
any allotment, followed by those who were allotted fewer shares
than they had applied for.,
Finance Minister P Chidambaram had said last year that he wanted
to send out a strong signal to those attempting to defraud investors
by compensating them for the losses they had incurred. He had
told SEBI to work out a mechanism to ensure this.
The SEBI board will now have look at Wadhwa committee's recommendations
and then take appropriate action. This would mean going back
to old records with market intermediaries and identifying thousands
of investors, which can be a cumbersome exercise.