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SEBI censured BSE for guilty of lapses in share sale of NMDC

Sep 12, 2014 17:17 IST

Securities and Exchange Board of India (SEBI) on 11 September 2014 censured Bombay Stock Exchange (BSE) for its conduct in share sale of National Mineral Development Corporation (NMDC) worth 6000 crore rupees through Offer for Sale (OFS).

The censure was issued by SEBI after it found BSE guilty of lapses while conducting share sale of 39.65 crores worth 6000 rupees offered by NMDC through OFC.

BSE in its order passed by Prashant Bhushan, the whole time member of the SEBI, in Mumbai further asked BSE
• To engage one or more independent consultants to review the entire sequence of events in the matter, the process followed, checks in place, systems employed while accepting the OFS bids by BSE.
• The Consultant should bring out the shortcomings, if any, and suggest remedial measures within a period of three months.
• BSE shall make a report to its Board, under intimation to SEBI within a further period of three months as to how the recommendations of the Consultant have been implemented including the action as directed.
• Securities and Exchange Board of India is advised to conduct a detailed probe into the confirmation of bids by Citibank N.A.

The Case

NMDC on 12 December 2014 offered 39.65 crore equity shares of the company through the OFS mechanism of BSE and National Stock Exchange (NSE). After the closure of issue, SEBI sought the bid data from BSE and NSE so as to ascertain the final cumulative bid.

However, on receiving the final cumulative bid, SEBI found a difference of about 4.55 crore equity shares and sought a clarification from BSE on 13 December 2012.

In its reply to SEBI on 24 December 2012, BSE stated that the difference in the final cumulative bid was due to the fact that it was not able to upload the bid of Citibank for 4.55 crore equity shares worth 902 crore rupees on time.

The bids could not be uploaded on the exchange system in time, on account of an inadvertent human error and due to large volume of bids received in the last half an hour before the close of trading i.e. prior to 03.30 PM. Therefore, Citibank was permitted to formally confirm the bid for 4.55 crore shares in the system between 06.22 PM to 06:30 PM.

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