Sebi writes to Fin-Min on money laundering probe

The markets regulator Securities and Exchange Board of India (Sebi) has sought help from various investigative agencies under the finance ministry to tackle the alleged money laundering in listed companies.

Sources with direct knowledge of the matter said that Sebi recently wrote to the finance ministry, highlighting the modus operandi used by certain low value companies to evade taxes.

"The regulator has sought that various investigative agencies including enforcement directorate, financial intelligence unit and the income tax department expedite their investigation in the listed companies' 'tax evasion'," said a source.

Additionally, Sebi also plans to suspend the trading in the companies that are suspected of market manipulation and tax evasion through the exchange platform.

The regulator is currently examining close to 100 listed companies. Considering the number of companies involved, regulatory estimates peg the quantum of the alleged scam at close to Rs 20,000 crore.

The modus operandi is believed to be similar to the one seen in the cases of Radford Global, First Financial Services and Moryo Industries. Through two interim orders, the market regulator has so far barred over 360 entities from the capital markets including operators, traders, promoters and persons acting in concert.

According to initial investigations by Sebi, these 100 companies 'exist only on paper' and are using the exchange platform to convert 'black money into white'. These firms, thanks to the clause of a compulsory one-year lock-in on shares issued through the preferential route, were eligible for LTCG on any gains made on sale of these shares.

"Probe is underway to verify whether these companies and related entities carried out trading among themselves to manipulate share prices, before and after preferential allotment," said a source.

So far the Special Investigative Team (SIT) on black money has already taken the case on record and the Income Tax department has initiated investigations into the matter.

Securities and Exchange Board of India ( SEBI )