Getting evidence, data about 'mule accounts', says SEBI Chairperson

Mumbai (Maharashtra) [India], January 20 : The Securities and Exchange Board of India (SEBI) is getting evidence and data about mule accounts and the practice of putting in inflated initial public offering (IPO) applications and will review its policy to take enforcement action in such cases, its Chairperson Madhabi Puri Buch has said.
"We will work accordingly," Buch said at an event organised by the Association of Investment Bankers of India (AIBI) on Friday.
"Mule accounts, we all know how those works. We are now getting evidence and data about it. We have to do something about it," she said.
She also said, "You put in hundreds of crores of applications with multiple banks knowing that they will get rejected. So the whole purpose of applying is to inflate the numbers. What we are unhappy about are some of the malpractices we see," Buch said.
According to the official SEBI website, a 'mule account' is a trading account maintained with a stock broker or a dematerialized account or bank account linked with such trading account in the name(s) of a person.
A mule account is effectively controlled by another person, whether or not the consideration for transactions in the account is paid by the individual or not, SEBI said.
Further, speaking on malpractices in IPO applications, SEBI chairperson Buch said that the board is seeing a pattern of more frequent names occurring in such kinds of malpractices.
"People are now putting in applications to withdraw them later just to increase the numbers of IPO applications. We now have the data and evidence to see such practices. We are seeing a pattern of more frequent names occurring in such kinds of malpractices. In the interest of the investors, we will be required to review policy and take enforcement action in such cases. Its our job to protect investor against those.
"But conceptually, it is a free market and we believe in market forces so long there is information and a level playing field, if there is risk-taking in the market, we should not be coming in the way of investors wishing to take risks," Buch said.
"I would only draw a parallel to say that in the bond market, there is a lot of anxiety and there is no appetite in the market. At least in the equity market, there is an appetite for higher-risk assets. Should we be anxious about it? The answer is No. So long is the investor is coming with his eyes open there is no mischief that will happen," she added.