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Dr. Kirit Somaiya
Investors’ Grievances Forum
Ex Member of Parliament
President, Investors’ Grievances Forum
FOR FAVOUR OF PUBLICATION
February 16, 2007
Statement of Dr. Kirit Somaiya on
TERRORISM IN CAPITAL MARKET
The caution expressed by Mr. M.K. Narayanan, National Security Advisor, on abuse
and terrorist money in the Indian Stock Exchanges welcomed and appreciated by Dr.
Kirit Somaiya, ex Member of Parliament and President, Investors’ Grievances Forum.
The abuse and fear of terrorists and mafias using the Participatory Notes route has
already been highlighted by the Reserve Bank of India, SEBI, S.S. Tarapore
Committee, Ashok Lahiri Committee, Investors’ Grievances Forum and the
Intelligence Bureau in the past.
Ambiguous, unknown investors are abusing, routing their suspicious investment via
Mauritius. The shocking development of 2006/07 is that these entities have now
started subscribing in Public Issues, IPOs through PN Route. Investors’ Grievances
Forum brought to the notice of SEBI and the Finance Ministry the abnormal increase
of applications through PN route/sub-accounts in last one year. The ultimate
investor, beneficiary has remained, is remaining unknown. Various artificial layers
have been created by the investors for investing both in primary and secondary
capital markets.
Dr. Somaiya had detailed discussions with the Finance Ministry and SEBI on the
danger of anonymous PN route investment. He also suggested to SEBI to study in
depth the applications and investment in the recent IPOs of Ashtavinyak and Nissan
Copper. The recent IPO of Ashtavinayak with Rs.50 crores and Nissan Copper IPO
with Rs.30 crores have large number of applications through PN route.
Dr. Somaiya has once again reminded the abuse of PN route, suspicious transactions
and abnormal increase of investment through unknown PN route investors. In June
2006, Dr. Somaiya submitted a detailed representation to all the concerned –
Finance Minister, RBI, SEBI. The abuse of PN route by the terrorists and mafias has
already been brought to the notice of the Government in june 2006.
The rough estimated of increase in the inflow of FII through PN route is astonishing.
During 2005-06, 88% of the FII investment in India has come through PN route. In
2002-03, the same was less than 15 to 20%.
9C, Neelam Nagar, Mulund East, Mumbai 400 081
Tel: 25644151 ▪ Fax : 25647432 ▪ E-mail : [email protected]
Dr. Kirit Somaiya
Investors’ Grievances Forum
Ex Member of Parliament
President, Investors’ Grievances Forum
2
Investment FII – Participatory Note (PN) Route
Date upto
Total FII
Investment
Rs. Crores
31.3.05
31.3.06
Addl. Investment during 2005-06
1,44,596
1,93,396
48,800
Investment
through P.N.
Route
Rs. Crores
57,800
1,00,400
42,600
All the authorities, i.e. Home Ministry, Intelligence Bureau, RBI, SEBI, Finance
Ministry, accept that the terrorists and mafias are using the Indian Capital Market.
What is needed is a stern, strong action.
Dr. Somaiya once again urged the Government to stop all the transactions,
investment through PN route of FII where the ultimate investor is not known.
PRESS SECRETARY
9C, Neelam Nagar, Mulund East, Mumbai 400 081
Tel: 25644151 ▪ Fax : 25647432 ▪ E-mail : [email protected]