Sucheta Dalal :Uncharted
Sucheta Dalal

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Uncharted  

April 21, 2010

It is stunning to see Standard Chartered Bank's IDR prospectus simply blank out the cases filed against it in the scam of 1992 and also the nostro-vostro account scandal in the 1990s.

 

Show me the person and I will show you the rule—for the past couple of years, we have often accused the market watchdog of following this dictum. Whether it is licensing, registration or clearances of various proposals, it is the same. Even though we know this, it is stunning to see Standard Chartered (Stanchart) Bank's IDR (Indian depository receipt) prospectus simply blank out the cases filed against it in the scam of 1992 and also the nostro-vostro account scandal in the 1990s. Many of these cases involve Rodney Galpin, then head of the international bank. Its fat prospectus (running into 800-odd pages) to raise over $500 million through the first ever IDR issue has blanked out at least 15 litigations pending against it (by the enforcement directorate) or pending against Andhra Bank. When asked, its head of communications wrote to say: "The IDRs represent the shares of Standard Chartered PLC, UK, the ultimate parent company of Standard Chartered Bank, India. In accordance with the disclosure requirements under the SEBI Regulations, IDR Rules, other applicable laws and international practices, SC PLC has made appropriate disclosures of all material issues in the draft offer document filed with SEBI. We have nothing further to add beyond what is disclosed in the DRHP."

This is false. Page 414 of the draft prospectus says that "neither the Company, any member of the Group, any Director or any material associate of the Company" are involved in any material legal or arbitration proceedings or litigation. Does this mean that SEBI accepted Stanchart's contention that all securities scam-related cases are immaterial? That is strange because the Special Court is in full session and handing out stringent sentences every few months. If the outcome of the cases would not be financially material to Stanchart, then why fight shy of disclosure? And why argue about what is relevant to the global entity, when the money is being raised from Indian investor in the Indian market?
Our bigger issue is with SEBI for demanding lower disclosure standards from an international company while clearing the first ever IDR prospectus. Were SEBI officials so overawed? The cases by themselves will not affect Stanchart's ability to raise funds in India, then why the lack of transparency? If the IDR story is going to begin with this bad precedent, it doesn't augur well for Indian investors. —
Sucheta Dalal


-- Sucheta Dalal



 



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