S.E.B.I. tracks black money laundering in stock markets

by NewsGram Staff

Stock market is one of the most preferred establishments for entities which indulge in money laundering and tax evasion. Securities and Exchange Board of India (S.E.B.I.) is all set to eliminate any scope for this with its decision to suspend trading in all the listed companies these entities use to accommodate such unfair practices.

Based on the three parameters set by the financial market regulator, if any company is found to fall under more than one of the criteria, it would suspend the shares of those entities and ensue appropriate action against them.

The parameters formed by S.E.B.I. include the mentioned address being non-existent, misuse of preferential allotment, and weak fundamentals that do not support price rise. It can be noted that preferential allotment is a major route for money laundering.

In its probe S.E.B.I. noticed ups-and-downs in prices in shares of the companies which were non-existent in reality. The shares were allotted preferentially to favorite entities and prices were pushed up without any fundamental basis, which was then followed by an exit by the investors.

In due course, the shares were sold back to the company or the entities translating big profits. S.E.B.I. noted that in such stocks fundamentals did not justify the price. Crores of rupees are involved in such illicit activities that pick momentum during the last few months of a fiscal year and are under the scanner.

Some listed firms and promotion channels have been found to offer regular services to offenders to help them in the tax evasion and laundering of black money.

The watchdog is contemplating a strong move against such entities to set an example.